Feeble stock market propped up by success of its own 1%
One of the key drivers to the development of the resilient investing system is the recognition that we can no longer count on the steady long-term growth of the stock market to be the driver for growing our assets. Frequent extreme volatility, with the market struggling to keep up with inflation over the course of a decade of downs and ups, as well as uncertainty about whether ecological limits, increased costs of scarce raw materials, or social unrest will undermine the steady-growth machine of the global economy, all led us to step back a bit and look at ways to “wean from Wall Street.”
Still, even in a year of sputtering markets and big global economic disruptions, the S&P 500 is holding steady, so that’s a good thing, right? Well, maybe, maybe not. It turns out that five companies (yup, 1%) are responsible for keeping the ship on an even keel. If we disregarded the big years from “mega-cap” companies Amazon, Alphabet/Google, Microsoft, Facebook, and GE, the market would be down 2.2%—and unless you hold some of the big winners, you may be down as well. Amazon is up over 100% year-to-date and the other four are up 16-40%, while the rest of the “gang of 500” underperformed so much that the index as a whole only eked out a 0.06% gain.
Just another reminder that resilient investors will want to continue to pursue a much broader approach to diversification than simply having your eggs in a range of Wall Street baskets. Our book The Resilient Investor discusses ways of weaning off Wall Street that include community investing, a focus on personal and tangible assets, and a wide range of related strategies.