stock market risks associated with the largest tech companies
by Aleksei Kirilov & Valeriy Kirilov The almost non-stop growth of the stock market over the past year and a half from April 2020 to November 2021 (at the time of this writing) has far outstripped the economic recovery. What was the main driver of this growth, how long will it last, and what potential threats can it create? To find answers to these questions, we analyzed the behavior of one market sector - the largest technology companies. Information from Yahoo services https://finance.yahoo.com and Finviz https://finviz.com was used as the initial data.
the role of tech companies Figure 1 shows graphs of the relative change in the S&P 500 and Russell 2000 over two and a half years from mid-May 2019 to mid-November 2021. As shown in Figure 1, starting in early 2021, Russell 2000’s mid-cap and small-cap stocks have stalled, unlike the S&P 500 stocks. Figure 1
Figure 2
In order to analyze how the shares of the largest companies changed from mid-May 2019 to mid-November 2021, we took the seven largest companies with a capitalization of more than $ 500 billion, with the exception of Tesla: AAPL, MSFT, GOOG, GOOGL, AMZN, FB, NVDA1. The next descending capitalizations of BRK-B and BRK-A (Berkshire Hathaway Inc.) are rather funds. And the next in terms of capitalization, JPMorgan Chase & Co. is already far behind NVDA, see Figure 2. For brevity, in what follows, we will refer to the listed seven companies as FAMANG. Unlike the well-known abbreviation FAANG, Microsoft has been added here and, in addition, Netflix has been replaced by NVIDIA. 1 / Tesla was excluded from this list because, in our opinion, the change in the stock quotes of this company deserves a separate study and is beyond the scope of this article.
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Intelligent Risk - February 2022
