The stock market is made up of a vast collection of all kinds of different companies, right? From gigantic biotech stocks to tiny consumer goods stocks, there are thousands of securities running through the veins of Wall Street.
So why are only a select few holding up the stock market on their own?
Wall Street is hanging on by a thread. Here’s what you need to know about it and how it could soon be evolving…
Since the beginning of the year, the stock market is virtually flat (up roughly 0.1%). The raging bull market has clearly slowed down dramatically, but it could be much, much worse…
If not for the top 1%, the benchmark S&P 500 (SPX) stock market index would be down 2.2% right now!
And the top 1% is made up of 5 stocks you’ll find to be familiar…
- Amazon (AMZN)
- Google (GOOGL)
- Microsoft (MSFT)
- Facebook (FB)
- General Electric (GE)
AMZN is leading the charge with its 104% year-to-date returns. Both FB and AMZN have crossed over the $300 billion mark so far this year.
Also worth mentioning is Netflix (NFLX), which is up 120% on the year. However, NFLX is so comparatively small that it doesn’t have anywhere near the same impact as the 5 aforementioned market leaders.
But where are the other big boys like Wal-Mart (WMT) and Apple (AAPL)?
AAPL is actually down over 3% this year and WMT is having its worst stock performance since the 1970s at -33% to date.
With 5 securities acting as the thread that’s holding the market together, Wall Street appears to be extremely vulnerable. And it might get even more so…
Since large-cap stocks are more protected and prepared for credit tightening than small-cap stocks, the impending rate hikes from the Fed could widen the gap further between the top 1% and the rest of the market.
That evolution could spark even more worrisome market conditions, and it wouldn’t take much to disintegrate that final thread.
What’s becoming more and more clear is that there are increasingly more ways for the market to get hurt than there are for it to continue climbing. Now is the time to prepare.
