Taps Coogan – June 30th, 2023

The following article is reposted from Visual Capitalist.

S&P 500 companies hold $7.1 trillion in assets, and account for close to 80% of available market capitalization on U.S. stock exchanges.

The index serves as a barometer for the U.S. stock market, covering the largest public U.S. companies by market capitalization. Often, it reflects investor sentiment and is considered an indicator for U.S. economic health.

As the S&P 500 enters a bull market after the longest downturn in decades, the above graphic shows the entire makeup of one of the world’s largest markets.

Top S&P 500 Companies, by Weight

Here are the biggest S&P 500 companies by sector and weight, using data from Slickcharts. Data is as of May 5, 2023.

Rank, by Weight	Name	Sector	Weight (%)
1	Apple	Info Tech	7.46
2	Microsoft	Info Tech	6.69
3	Amazon.com	Consumer Discretionary	2.72
4	Nvidia	Info Tech	2.04
5	Alphabet Inc. Class A	Communication Services	1.82
6	Berkshire Hathaway	Financials	1.69
7	Alphabet Inc. Class C	Communication Services	1.59
8	Meta Platforms	Communication Services	1.50
9	UnitedHealth Group	Health Care	1.34
10	Tesla	Consumer Discretionary	1.32

Over the last decade, big tech names have dominated the index.

The tech sector makes up over 26%, with Apple, Microsoft, and Nvidia as the top S&P 500 companies by market capitalization. Despite interest rates climbing at warp speed, a select number of big tech names have maintained, or even expanded their influence on the index over the last year.

In many cases, investor demand for AI-related stocks has fueled these increases.

Amazon is the third-largest company in the index. While shares tumbled in 2022 amid slowing sales, they have since rebounded by about 46% this year. Like Amazon, consumer discretionary firm Tesla has seen a strong reversal as the index’s 10th biggest stock by weight.

In the financial sector, Berkshire Hathaway has the highest weight (1.7%) while UnitedHealth Group (1.3%) is the top in health care. The health conglomerate even towers above JP Morgan, the biggest bank in America.

S&P 500 Sectors and the Market Cycle

Below, we show the 11 sectors in the S&P 500, organized by weight and their typical performance over the business cycle:

• Cyclical: Rise and fall with the market cycle, often correlated to expansions or contractions
• Defensive: Typically are negatively correlated to the market cycle, with more stable earnings and dividends

Sector	Weight	Type
Information Technology	26.1%	Cyclical
Health Care	14.5%	Defensive
Financials	12.9%	Cyclical
Consumer Discretionary	9.9%	Cyclical
Industrials	8.6%	Cyclical
Communication Services	8.2%	Cyclical
Consumer Staples	7.4%	Defensive
Energy	4.5%	Defensive
Utilities	2.9%	Defensive
Materials	2.6%	Cyclical
Real Estate	2.5%	Cyclical

Numbers may not total 100 due to rounding.

Information technology, health care, and financials have the highest share in the S&P 500. Together, they cover over half the index.

S&P 500 Companies: Mixed Signals in 2023

In many ways, there are two major themes playing out this year so far for U.S. equities, which is the best-performing asset class year to date.

First is that seven big tech companies—Apple, Microsoft, Nvidia, Google, Tesla, Meta, and Amazon—are driving virtually all of the index’s gains. These companies have seen double or triple-digit returns this year so far. As of May 31, tech sector ETFs saw $8 billion in inflows to date, the highest across any sector.

Secondly, the energy and health care sectors have seen the highest outflows, at $9 billion and $4 billion, respectively.

Even with interest rates hitting 15-year highs, extreme greed is in the market, based on the Fear and Greed Index. This may signal higher risk in the S&P 500, since a hit to these few companies with high weightings could significantly effect the broader index.