The S&P 500 is a general stock market index that measures the performance of 500 companies in the U.S. stock exchange. The S&P 500 index is calculated using two different methods: the Market Capitalization Weighting Method and the Equal Weighting Method. The Market Capitalization Weighting Method produces the S&P 500 returns that we are most familiar with – the publicized returns that we often see from most major news outlets. This method calculates its returns by having each company weighted proportionally to its market capitalization. The market capitalization, or the value of the company, is accomplished by multiplying the number of outstanding shares by the current market price of one share ... resulting in higher-capitalization (larger) companies having a greater impact on the index’s performance than lower-cap (smaller) companies. Alternatively, each company in the index has an equal weight regardless of its market capitalization when utilizing the Equal Weighting Method (100% / 500 companies = 0.2% each). This results in all companies within the S&P 500 contributing equally to the S&P 500’s returns. As of October 4, the S&P 500 (Market Capitalization Weighting) had a year-to-date return of +11.73% as compared to the S&P 500 (Equal Weighting) of (-)2.16% (see chart below)... suggesting that larger companies within the S&P 500 have significantly outperformed smaller & mid-sized companies this year. While not uncommon, the significant difference in these returns necessitates further interpretation. |
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chart generated by https://ycharts.com/ |
As seen in the above chart, most S&P 500 companies were moving in unison throughout the 1st quarter of 2023 before the largest companies began to diverge. Further analysis shows that nine of the top ten largest S&P 500 companies dramatically outperformed the smaller 490 companies. For example, as of October 4th, 2023, the top 10 stocks accounted for 31.3244% of the S&P 500’s total returns when utilizing the Market Capitalization Weighting Method– whereas they made up only 2% when utilizing the Equal Weighting Method.1 Of those ten stocks, United Health Group (UNH) had a year-to-date return of (-)2.57% and Berkshire Hathaway (BRK.B) had a return of (+)11.26%. The other eight stocks accounted for returns of between (+)33.91% and (+)201.5%2. |
As of October 5, the top 10 stocks in the S&P 500 by index weight were: information courtesy of https://www.slickcharts.com/sp500 # Company, Symbol, Weight 1 Apple Inc , AAPL , 7.200886 2 Microsoft Corp, MSFT, 6.646956 3 Amazon.com Inc , AMZN , 3.203809 4 Nvidia Corp, NVDA , 3.092108 5 Alphabet Inc, Cl A GOOGL , 2.244922 6 Tesla Inc, TSLA , 2.011928 7 Alphabet Inc, Cl C GOOG , 1.922916 8 Meta Platforms Inc, Class A META , 1.89797 9 Berkshire Hathaway Inc, Cl BBRK.B , 1.763092 10 Unitedhealth Group Inc, UNH , 1.339779 |
When returns are somewhat similar for both the weighted and unweighted indices, the S&P 500 Market Capitalization Weighting Method may be used as a reliable indicator of annual performance. However, when there is a major divergence between the two methods as there is this year, it indicates that there can be more to the story. This year’s story suggests that a very large number of companies in the S&P 500 have significantly underperformed the (-)2.16% annual Equal Weighting Method return to garner a drop in the average return from +11.73% to (-)2.16%. This appears to be especially true when considering that only nine companies (making up 30%+ of the index) significantly outperformed (-)2.16%. As always, if you have any questions please feel welcome to contact any member of our team. |
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Who Can Deduct Car Expenses On Their Tax Returns?Can you deduct expenses such as gas, depreciation, and lease payments on your tax returns? If you are a business owner or self-employed individual, you may be able to. If you use your car for business and personal purposes, you will want to base any deductions on the mileage used for business. There are two ways to calculate the car expenses you can deduct. The first method calculates and deducts expenses, including depreciation, lease payments, gas and oil, tires, repairs and tune-ups, insurance, and registration fees. The second is to use the standard mileage rate, which is a rate calculated to represent gas and some of the above factors. In 2023, the standard mileage rate is 65.5 cents per mile. Taxpayers who want to use the standard mileage rate for a car they own must use this method in the first year the vehicle is available for use in their business. This information is not intended to substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax professional. Tip adapted from IRS.gov |
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We’ve all been there. You’re scrolling through your phone, computer, or tablet, and a notification pops up, “Update Me!” While that isn’t the exact wording, the meaning is the same. Something wants to be updated to the most recent version. But the banner gets in your way, and you tab it to the side, thinking you will get to it later. Then we forget it. This doesn’t seem like a big deal. But it turns out updating your programs can be one of the easiest ways to make your life safer in the long run. Some software updates contain security measures that help patch vulnerabilities that could lead to a cyberattack. They may include safety features that help keep intruders out if your phone is hacked or stolen. So the next time you get an annoying pop-up asking for an update, take the extra time and get your device up to speed. It could be the easiest security upgrade you ever have. |
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Hannah went to a local hardware store to buy some small items. One would cost $2, two would run $4, but buying 122 would only cost $6. She purchased 122, yet she was not buying in bulk; she could carry what she bought with one hand. What did she purchase?
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OCTOBER 2023: Interpreting The S&P 500 - Things May Not Be As They Seem
October 30, 2023