S&P 500 Composite Breakdown Throughout History

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Further to my analysis on the probability of beating the SP500, I wanted to further understand if the composition of the index has dramatically changed throughout the years. Was the top 10 stocks still the top 10 stocks from 2008? Was there any major shifts between industries?

The caveat here is that I only used the current list of stocks in the SP500, but I ran the numbers only from 2008. There was about a difference of 64 stocks that were not accounted for. Therefore this analysis is more for directional uses.

Market Cap by Sector

I first took a look at all the major sectors and how it grew overtime. My thought here was that the fastest growing sectors should also be the largest and vice versa. However, the results did surprise me.

Consumer Discretionary, Communication Services and the IT sectors doubled in weight since 2008. Healthcare, industrials, materials, real estate and utilities had either slight/immaterial declines or remained consistent through the years. Consumer staples and the energy sectors saw the largest decline.

Values represents the % weighting of the SPX index during it’s respective year.

Top 10 Stocks by Market Cap

FAANG has dominated the market for the past decade. For those unfamiliar with FAANG, it’s an acronym that represents Facebook, Amazon, Apple, Netflix and Google. Surprisingly, the only symbol that’s not included in the top 10 list was Netflix.

The total weights of the top 10 stocks of each year had remained consistent from 2008 to 2016. But the bull market from 2016 to 2021 saw an significant increase in the weighting of the top 10 stocks; an increase from 22% weighting in 2016 to over 30% in 2021.

Reviewing the list of top 10 stocks by market cap across each year, there wasn’t a significant shift in the composite. Therefore, the increase in weighting was caused by the top 10 stocks growing at a higher rate relative to the rest of the index.

This coincides with the fact that the top 10 has been significantly more tech concentrated. On top of the usual FAANG, Nvidia and Tesla was added to the list in 2021. This was due to 2 huge paradigm shifts; move towards electrification (Tesla) and the rise of both blockchain and AI/ML (Nvidia).

Above is the list of top 10 stocks by year. The ‘Y’ in green indicates whether if the stock was one of the top 10 stocks for that particular year.

What’s also notable is that the slower growing, mature stocks dropped off the list. This included large oil companies like Chevron and Exxon. Few other staples such as Walmart and GE that had been in the top 10 list for many years has also dropped.

The IT sector has been in the hot seat for many years, which has driven stocks to crazy multiples over the rest of the index. What’s more interesting is as I learn more, the consumer discretionary sector had the same boom in growth, but without the same attraction from retail investors.

An analysis I’ll review in the future is that breakdown of the consumer discretionary sector. It’ll be interesting to see whether how a high growth stock in this sector compares to a tech darling like Amazon and Google.

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