The Trillionaires assumed control of the S&P 500 in 2023, rescuing it with a substantial impact on the market’s dynamics, whether for better or worse.

This group, comprised of seven U.S. companies valued at $1 trillion or more—Alphabet Inc. (Google’s parent), Inc., Apple Inc., Meta Platforms Inc. (Facebook’s parent), Microsoft Corp., Nvidia Corp., and Tesla Inc.—has garnered a moniker that exudes grandiosity. However, despite the evocative nickname, MarketWatch opts for the more quantifiable reference of a trillion-dollar valuation to emphasize their significance.

In 2023, the Trillionaires lived up to their name by contributing over $5 trillion to the S&P 500’s market capitalization, constituting nearly 65% of the annual gain that bolstered retirement accounts and index-fund portfolios. A concentration of market gains of this magnitude has only been observed once before, in 2020, and it involved the same group of companies.

Their influence extends beyond market-cap growth, excluding Tesla. Nvidia played a pivotal role in ending the S&P 500’s earnings recession, and the strategic maneuvers of Big Tech prevented a decline in corporate America’s record profit margins amidst rising inflation rates. In essence, this exclusive cluster of companies not only orchestrated the market rebound in 2023 but also forms the crux of expectations for 2024 and beyond.

Contemplating the Trillionaires’ sway over the S&P 500, one might question whether the traditional investment thesis of S&P 500 index funds, based on the strength of random diversification and numerical principles, is under threat. Deep Dive investing columnist Phil Van Doorn allays such concerns, asserting that the S&P 500 is inherently self-correcting, rewarding success over time.

While this may hold true in the long term, challenging these deeply entrenched and well-capitalized incumbents proves daunting for potential rivals. Short-term challenges may emerge, especially concerning artificial intelligence windfalls and associated costs, potentially delaying the expected growth in profit margins during the AI era.

The narrative also raises existential questions about whether these companies should shape the market and economy. As they embrace AI to automate functions, resulting in layoffs, Silicon Valley develops software with broader applications. The pursuit of higher profit margins prompts reflection on the trade-off with a potentially diminished labor market. Consequently, these companies, prompting such contemplation, merit a more fitting epithet than a reference to Hollywood gunslingers.

Moreover, the Trillionaires warrant scrutiny as they navigate the market through an uncertain future, prompting considerations of potential monopolization, even though antitrust law does not directly apply to the stock market.

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