Ben Carlson, Columnist

A Few Big Stocks Don't Tell the Whole Market Story

Investors should also look at the number of equities that advance versus those that decline.

May 24, 2017 at 9:00 AM UTC

Ben Carlson is director of institutional asset management at Ritholtz Wealth Management. He is the author of "Organizational Alpha: How to Add Value in Institutional Asset Management."

Charging ahead.
Photographer: Michael Nagle/Bloomberg

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Investors are becoming increasingly worried that a few stocks seem to be driving the returns in the S&P 500 this year. Apple is up more than 33 percent in 2017. Facebook and Amazon shares are both up around 28 percent. It’s estimated that these three companies account for almost one-third of the gain in the S&P 500.

The worry is that, with the gains so concentrated in so few names, the market rally is getting long in the tooth. The problem with this argument is that this is how it usually works with market-cap weighted indexes -- very few names account for the majority of the gains.