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This dynamic is not wholly unusual in the history of the S&P 500, though it is extreme, and it has been exacerbated by the rapid growth of some tech companies through the pandemic. (At the end of 2018, Microsoft’s and Apple’s combined index weight was less than Apple’s is today on its own.) The previous company to reach Microsoft’s 6.2 percent weight in the index was IBM in the mid-80s, based on data for the end of each calendar year.
“I don’t think it’s a problem,” said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. “This is what the whole thing is worth, and if Apple or Microsoft go up or down, there is proportional impact because they are worth more. It’s market-driven.”
The S&P also produces an “equal weight” index, where each stock has the same effect on the wider group. In March, that index fell 2.6 percent.
Another commonly cited measure of Wall Street’s performance, the Dow Jones industrial average is a price-weighted index that has been criticized for how it emphasizes companies based on their share price alone.
And then there are the underlying sectors, which are also tracked in separate indexes by S&P. These indexes, which tend to more directly show pain afflicting their subsets of stocks, show that the financial sector fell almost 10 percent in March, while energy stocks dropped 0.5 percent and real estate companies slid 2.1 percent. They also show that other parts of the market — like utilities — fared just fine.
“There were so many sectors that underperformed and were in the red across the month, and that was completely pushed over and overshadowed by the gains in big tech,” Ms. Cincotta said.
S&P Dow Jones Indices, which maintains the S&P 500 as well as the Dow, has tried to address the impact of these specific weightings, at least on different sectors. In 2018, it moved Alphabet and Meta out of the tech sector and into the communications category with Netflix, while leaving Amazon in the consumer discretionary category with other retailers.
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