It would be easy to conclude the stock market is having a strong 2017 based on a quick glance at the S&P 500 or Dow but a deeper look reveals the market is not participating in the rally evenly. Of the major size and style segments, only larger growth companies were performing well through the end of May as value and small companies struggled to make significant gains.
Mega-caps led the way as the five biggest names in the S&P 500, all well-known technology companies – Apple, Alphabet (Google), Amazon, Facebook and Microsoft – were up 25% year-to-date. Since the S&P 500 is a cap-weighted index, these five stocks have the most influence of any group of five stocks, comprising between 12% to 13% of the index. The equal weight S&P 500, which gives these companies a combined 1% weight, is more than two percentage points lower than the cap-weighted index on the year. The Russell 2000, a small-cap index, was up just 1.5% through the end of May. Most of the market’s performance is being driven by a small number of firms.