The U.S. stock market appears to be muting the effects of the coronavirus outbreak and resuming its trajectory towards more highs. As far as earnings go, however, it’s large cap movers in technology that are leading the way.
Tech giants like Facebook, Microsoft, Amazon, Apple, and Google’s parent company Alphabet have increased their fourth-quarter earnings by 16% year-over-year, according to data from a CNBC report. As a result of their earnings efforts, the S&P 500 is up 2%–mostly concentrated in these tech heavyweights.
“Mega-cap earnings strength contrasts with small-cap earnings weakness,” the firm’s analysts led by David Kostin said in a note to clients. “The Russell 2000 experienced a 7% earnings decline during the fourth quarter, as many smaller firms posted weak top-line growth and had difficulty absorbing rising wages and other input costs.”
Per the CNBC report, the five aforementioned tech giants account for “18% of the total S&P 500 market cap. The last time value was this concentrated among five stocks was during the tech bubble in 2000, when Microsoft, Cisco, General Electric, Intel and Exxon Mobil were the index’s five largest companies.”
“Lower growth expectations, lower valuations, and a greater re-investment ratio suggest the current concentration may be more sustainable than it proved to be in 2000,” Kostin wrote in a Jan. 31 note.
For large cap earnings, one fund to take advantage of is the WisdomTree U.S. Earnings 500 Fund (NYSEArca: EPS). EPS seeks to track the price and yield performance, before fees and expenses, of the WisdomTree U.S. LargeCap Index.
Under normal circumstances, at least 95% of the fund’s total assets (exclusive of collateral held from securities lending) will be invested in component securities of the index and investments that have economic characteristics that are substantially identical to the economic characteristics of such component securities. The index is a fundamentally weighted index that is comprised of earnings-generating companies within the large-capitalization segment of the U.S. Stock Market.
On the other hand, if investors sense a buy-the-dip opportunity for small cap earnings, they can consider the WisdomTree U.S. SmallCap Earnings Fund (NYSEArca: EES). EES seeks to track the price and yield performance of the WisdomTree U.S. SmallCap Index.
95% of EES’s total assets (exclusive of collateral held from securities lending) will be invested in component securities of the index and investments that have economic characteristics that are substantially identical to the economic characteristics of such component securities. The index is a fundamentally weighted index that is comprised of earnings-generating companies within the small-capitalization segment of the U.S. stock market.
For more relative market trends, visit our Relative Value Channel.
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