The 5 Biggest Stocks Driving The U.S. Market, But Will They Hold Their Positions?

The imposing tech companies have propelled the U.S. market to claw back some of the losses it has suffered since the beginning of the year. Other stocks are also coming up to help bear the load.

Some market indicators hit new highs last month, and the trend has continued to this month. This is a clear sign that the stock market is recovering after months of downward fall, a trend that even got the top stock brokers worried.

To some good news now. The story going on at Wall Street is that the five giant stocks are currently representing an unprecedented high in the U.S. share market, with their total value being more than even the internet bubble of the year 2000.   

Does this get you worried about a top-heavy market? You shouldn’t. The historical data from top trading platforms show that the total market share of the top five stocks is way below the long-term average of the stock market.

By market capitation, the five leading stocks currently are Facebook (FB, -8.31%), Amazon.com (AMZN, -2.24%), Alphabet (GOOGL, -5.45%), Apple (AAPL, -3.07%),  and  Microsoft (MSFT, -2.00%).

The problem that many top stock brokers face when comparing the current market to the 2000 internet boom is that the data used doesn’t cover many years. While it’s a fact that the five largest stocks currently take the biggest share in the stock market compared to any other time in the last 20 years, their total capitation is far much below what it was in the preceding decades.

So, even if there’s a sign that the stock market is bouncing back, it’s something not to get so much excited about, unless the stocks continue improving to beat the earlier records.

The data used was obtained from Dimensional Fund Advisors (DFA), and it shows that, since 1927, the average of the top five largest stocks in the market has an average of 17%. The current average of the top five largest stocks falls below this long-term value.

As DFA notes, what we are witnessing now - the new highs -  is not a new phenomenon in the stock market, it is something that had happened before, and at better proportions than what we have today.

Losing steam?

Are these top five performers going to maintain their position in the foreseeable future? It is the opinion of the best international stock brokers that investors should not put their hopes in the performance of these five companies. 

According to one study by DFA, companies that have occupied the top 10 positions, usually have their stocks lagging over the next five or 10 years. The fall in their stock prices results from the many investors who rush to buy their shares. Over time, the demand for the shares will go down, and their prices will follow suit.

The implication is that, as time goes, other stocks will probably overtake the five current top performers. This is a “natural destruction” that happens to top stocks. 

A good example is General Electric (GE, -2.284%). For the first five to six years of this century, its stock had the highest share price in the S&P. However, in the last five years, General Electric has shaded 77% of its share value and is now at position 65 among the companies in the S&P.

The share prices of the top five companies are also expected to fall. Of the five top stocks, the fall of Facebook may come sooner. Many companies are withdrawing their ads from Facebook, accusing it of failing to take action against content regarded as promoting violence and hate.

On Friday, Facebook saw its share price drop by 8% after Unilever halted all its adverts on Facebook, Twitter, and Instagram. Other companies that have halted or reduced their spending on Facebook ads include Coca Cola, Verizon, etc. and this has dealt a blow on its share price. 

This has forced Facebook to reverse its policies as the ad boycott sends its shares tumbling down. Right now, top trading brokers are very skeptical about Facebook shares.

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