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What’s the S&P 500 Without Its FAANGs?

Given the sheer size of “mega cap stocks”—being Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOG & GOOGL), Meta Platforms (FB), Tesla (TSLA), NVIDIA (NVDA), and formerly Netflix (NFLX)—most portfolios carry noteworthy exposure to these companies. 

And so it’s worth asking: how would the S&P 500, and most of our portfolios, have performed without these Mega Cap Stocks?

In our latest white paper, The Impact of Mega Cap Stocks on Portfolios and the Market, we estimated the leading index’s performance without its star constituents to answer that question. 

Download the white paper to read our full findings:

The Effects Excluding Mega Caps Would Have Had on the S&P 500’s Historical Performance & Risk Profile

When stripping out the entire cohort of Mega Cap Stocks, the S&P 500’s annualized performance in the five-year period ending February 28, 2022 would have fallen to 6.98% from 15.17% annually—a reduction of more than half. The index’s standard deviation would have seen an improvement of 4 percentage points, but the lost returns seem to sting more than the reduced volatility.

Individually, excluding any of the nine Mega Cap Stocks (but only eight companies due to Google’s two share classes) would have reduced both the performance and volatility of the S&P 500. That said, Netflix (NFLX), Meta Platforms (FB), and Alphabet (GOOGL) would have been missed the least in terms of performance contributed to the overall index. (Note that performance and standard deviation for Alphabet’s GOOG share class are identical to GOOGL and are not shown in the scatter plot below.)

Scatter Plot - SP500 against Mega Caps (standard Deviation, Performance)

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The pattern persists in each full calendar year since 2015. When each Mega Cap Stock is hypothetically excluded from the S&P 500’s total return, the index suffers. Notably, 2020’s 18.4% total return for the S&P 500 would have been a mere 3.3% had the eight Mega Cap Stocks been excluded, by our calculations.

Only in 2022 (year-to-date, through February 28, 2022) would removing the Mega Cap Stocks have actually boosted the S&P’s growth.


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So what does this all mean for typical portfolios? How much of an investor’s wealth would have been erased had any of these Mega Caps crashed? To what degree do Mega Caps play a role in a portfolio’s overall performance and risk?

For answers to these questions and more about Mega Cap Stocks, download the FREE white paper:

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