How Is The Stock Market Going Up In A Global Pandemic?

During a falling economy, like during the 2020 pandemic, the stock market actually grew many months.

This caused millions of people to scratch their heads in amazement.

Lots of people began to develop a distrust in the stock market.

If we inspect what really drives the stock market, we will make sense of these phenomena.

The US economy and world economy can decrease and US stock market can rise because the S&P 500’s top ten stocks make up 28% of the market.

Let Us Take a Look At Who These Top Ten Stocks Are

The S&P 500 reflects nearly all the largest stocks in the U.S., we often refer it to be synonymous with “the market” as a whole.

To simplify how to explain it, we need to realize the S&P index is really the U.S. stock index.

The Standard & Poor’s 500 Index, or S&P 500, is a market-capitalization-weighted index of exactly 505 large-cap U.S. stocks.

The index makes up 80% of the market value of the U.S. equities market.

Since it’s weighted by market cap, the largest stocks have a big impact on both the long-term performance and daily movement of the index.

This may shock you to know the 10 biggest stocks make up 28% of the index’s market value.

This means every investor should become familiar with these 10 giant companies so they can understand what drives the broader market.

This explains the original question of how the economy can be nose diving while the stock market is making gains.

Below is a list of the 10 largest companies in the S&P 500. Weighting and market capitalization are as of November 2020, and are courtesy of S&P Dow Jones Indices.

1. Apple Inc. (AAPL)

Index Weighting: 6.5%

Market Cap ($B): 1,750.1

Revenue ($B) (4-Quarter Trailing): 274.5

Net Income ($B) (4-Quarter Trailing): 57.4

Place Change from last month: None

Apple is a major producer of hardware and software products, primarily for the consumer market. Its most prominent product is the Apple iPhone brand, but Apple also produces other brands, including Mac computers and iPad tablets. It also operates the Apple Music and Apple TV media distribution platforms.

2. Microsoft Corp. (MSFT)

Index Weighting: 5.7%

Market Cap ($B): 1,532.2

Revenue ($B) (4-Quarter Trailing): 147.1

Net Income ($B) (4-Quarter Trailing): 47.5

Place Change from last month: None

Microsoft is a computer hardware and software company that makes products for both personal and enterprise use. A major player in the tech industry for decades, Microsoft is best known for its Windows operating system, the Microsoft Office suite of programs, and the Xbox game system. The company also is a major player in cloud computing services with its cloud platform, Azure.

3. Inc. (AMZN)

Index Weighting: 4.8%

Market Cap ($B): 1,292.7

Revenue ($B) (4-Quarter Trailing): 347.9

Net Income ($B) (4-Quarter Trailing): 17.4

Place Change from last month: None

Amazon is an online retailer of all kinds of goods, but has increasingly diversified its business. It also has a major cloud-computing business known as Amazon Web Services (AWS), and runs the Whole Foods chain of brick-and-mortar grocery stores.

4. Facebook Inc. (FB)

Index Weighting: 2.3%

Market Cap ($B): 705.0

Revenue ($B) (4-Quarter Trailing): 79.0

Net Income ($B) (4-Quarter Trailing): 25.3

Place Change from last month: None

Facebook runs the dominant social networking platform, by far the largest in the world. It also owns photo-sharing app Instagram, messenger app WhatsApp, and virtual reality equipment maker Oculus. Facebook rose in the rankings as people spent more time on social media to keep in touch during quarantine.

5. Alphabet Inc. Class A Shares (GOOGL)

Index Weighting: 1.8%

Market Cap ($B): 485.6

Revenue ($B) (4-Quarter Trailing): 171.7

Net Income ($B) (4-Quarter Trailing): 35.7

Place Change from last month: None

Alphabet is the parent company of search-engine giant Google. Among its other products besides the Google search engine, Alphabet runs video sharing site YouTube. It’s notable that the company splits its stock into two main share classes. Google’s C shares are nonvoting shares, meaning they do not entitle the holder to take part in proxy votes. The A shares usually trade for slightly more than the C shares and carry voting rights. Each of these shares trades on the S&P 500, and each is large enough, by itself, to make the top 10 list. If we counted together the two share classes, it would place Alphabet 4th on this list and would make up 3.6% of the index. There are also B shares, which have disproportionate voting rights and are only held by Google insiders. The B shares do not trade on the open market.

6. Alphabet Inc. Class C Shares (GOOG)

Index Weighting: 1.8%

Market Cap ($B): 475.9

Revenue ($B) (4-Quarter Trailing): 171.7

Net Income ($B) (4-Quarter Trailing): 35.7

Place Change from last month: None

(See above for company description.)

7. Berkshire Hathaway Inc. (BRK.B)

Index Weighting: 1.5%

Market Cap ($B): 400.2

Revenue ($B) (4-Quarter Trailing): 260.5

Net Income ($B) (4-Quarter Trailing): 22.2

Place Change from last month: None

Berkshire Hathaway is a holding company for the various investments Warren Buffett has made over the years. Among its many holdings are insurance businesses such as GEICO, large energy and utilities businesses, a major railroad, consumer brands such as ice cream store Dairy Queen, and manufacturers such as aerospace parts manufacturer Precision Castparts Corp. It also owns an enormous portfolio of equities, which is why Berkshire Hathaway notably fell several places in the rankings. Those equities took an enormous hit when stocks dropped during the first quarter, absolutely crushing Berkshire’s first-quarter profits, and dragging down the company’s stock.

8. Johnson & Johnson (JNJ)

Index Weighting: 1.3%

Market Cap ($B): 361.0

Revenue ($B) (4-Quarter Trailing): 80.9

Net Income ($B) (4-Quarter Trailing): 17.0

Place Change from last month: Up One Place

Johnson and Johnson is a medical and consumer products conglomerate. Its main three businesses are pharmaceuticals (both over the counter and prescription), medical devices, and consumer hygiene and wellness products. The last category includes notable brands such as Band-Aid bandages, Listerine mouthwash, and Neutrogena skin care products.

9. Procter & Gamble

Index Weighting: 1.3%

Market Cap ($B): 341.3

Revenue ($B) (4-Quarter Trailing): 72.5

Net Income ($B) (4-Quarter Trailing): 13.7

Place Change from last month: Up One Place

Procter & Gamble is a consumer products company that sells mainly personal care and home care products. They own over 65 brands, including Tide detergent, Pampers disposable diapers, Tampax tampons, Gillette razors, Crest toothpaste, and Ivory soap.

10. Nvidia Corp.

Index Weighting: 1.1%

Market Cap ($B): 309.3

Revenue ($B) (4-Quarter Trailing): 13.1

Net Income ($B) (4-Quarter Trailing): 3.4

Place Change from last month: New Entrant

Nvidia is a company that develops and manufacturers Graphics Processing Units (GPUs). GPUs are a type of computer chip used for creating computer graphics, usually for visual design or computer gaming. However, GPUs are increasingly in demand for other tasks such as cryptocurrency mining and artificial intelligence (AI) and machine learning development. We know Nvidia for its GeForce brand of consumer GPU’s.

As you see these companies are comprised of producing products and/or services in industries that are related to computers, internet services, and medical and pharmaceuticals.

Now you know how the stock market can go up during a pandemic while the economy takes a dive.

If you liked this article, you may be interested in learning about Exchange Traded Funds. The first ETF was developed in 1993. They are traded publicly on the stock exchanges and are easy to invest in. Most investors are happy with returns, and ETFs are a positive vehicle that can take your investing to a new level. Go here to learn more.

Guiding Cents Staff

Guiding Cents is online learning about Smart Investing & Spending Cents®. The Guiding Cents Staff researches financial information, products and services. The result is providing actionable articles and resources on how to earn more, save more, and manage money that enhance your life. We recommend only superior and proven products and services. Click the company logo to your left if on desktop, or above this paragraph if on mobile, to get on the Guiding Cents Newsletter subscription.

Recent Posts