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Revenge of the Giant Five

Revenge of the Giant Five

| July 13, 2020

Back on April 28, Jared Coffin and I shared a blog explaining the hidden weakness of the equity market. It's worth a read again as the situation is more acute now than ever.

Several weeks later, Wolf Richter has an interesting update on the situation today at MarketWatch. The issues we brought up are even more relevant going forward. The bottom line is that if you take out the "Giant 5" largest market capitalization stocks from the Wilshire 5000 index your performance suffers. In fact, since 2017 the Wilshire 5000 sans the Giant 5 got you nowhere. You would have been better in a savings account.

Here's the issue, should the Giant 5 catch a virus, will the rest of the index be strong enough to diversify you? Here in lies the near-term concern. Some say it's a stock-picker's market. Actually, it's the opposite. If you picked the right index, you picked the Giant 5. You may think you're diversified, but are you really?

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