Bloomberg News made an interesting observation this week: The biggest U.S. stocks have been beating the average performance of the S&P 500 this year by the most in more than a decade. According to their numbers, the 100 biggest stocks within the S&P 500 have gained 7.7 per cent in 2012. That compares to the 5.1 per cent gain for a version of the S&P 500 that strips out weightings for market value.
This marks a departure from recent years, when smaller stocks outgunned the bigger ones. Bloomberg noted that the 100 biggest stocks gained 77 per cent from the bear market low on March 9 to the end of 2011. The average S&P 500 stock, though, rose 128 per cent over this period.
Eddy Elfenbein, at Crossing Wall Street, takes these numbers a bit further, noting that the actual divergence between big companies and smaller companies began in late May 2011, meaning that the divergence has been going on for more than a year.
He also has a good explanation: "Part of this is what we've seen in the bond market – a rush away from risk. Just as bond investors have pushed Treasury yields to all-time lows, stocks investors have fled to the most secure names which tend to be the largest stocks on the market."
However, it is hard to see a clear rush for safety when you look at the subindex performance within the S&P 500. True enough, since May 28, 2011, energy stocks, materials and financials have lagged the broader market by a substantial amount.
However, consumer discretionary stocks have outperformed. And information technology stocks have been the top performers, rising 11.7 per cent. Apple, now the largest stock, has risen 74.5 per cent over this period. This raises the question of whether the perceived rush-for-safety is actually, well, a rush for iPads and iPhones.
David Berman