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This is Not Normal

 

This is Not Normal

Courtesy of 

Netflix, Facebook and Amazon are each up 60% in the first 11 months of the year. Apple, is up 50%. Google, the laggard, is up just 34%. These five stocks have added over $900 billion in market capitalization in the first eleven months of the year.

The tech-heavy index, of which these companies represent one third of, is up 33% year-to-date, and is on pace to close higher for the ninth year in a row. With double digit returns in six out of those nine years, the NASDAQ 100 has grown 21.5% a year for over this period, turning $1,000 into over half a bitcoin.

This sort of run would have been completely unthinkable coming out of the GFC [Great Financial Crisis]. At the bottom in 2009, none of these FAANG stocks were in the top ten in market cap for the S&P 500, Netflix wasn’t in the index, and Facebook was private. This is a totally ridiculous comparison but it’s my blog and I’ll do what I want, the 201-500 biggest stocks in the S&P 500 at the time had a market cap equal to what these five companies added in the first 11 months of this year.

The chart below shows that the total market cap of the S&P 500 in March 2009 was $6 trillion, and the cumulative market cap for the 300 smallest companies in the S&P 500 were less than what five companies added in eleven months this year.

People talk a lot about how to survive a bear market, but surviving a meltup can present similar psychological challenges. This doesn’t have to end tomorrow, but it can’t continue like this forever. Enjoy it while it lasts because nothing about this is normal.


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