Revenge of the Dow

Change is the only constant variable in the market. Startups mature. Incumbents become complacent. Markets get saturated. And so turnover at the top is inevitable. It’s only a matter of time before the king loses his crown.

Tech still dominates the top ten list and probably will for some time, but some cracks are starting to appear in their armor. Facebook and Nvidia are no longer in the ivy league of finance.

I was shocked to learn that Facebook, which has shed over $800 billion in market cap, is not the biggest loser, at least in dollar terms. Amazon and Microsoft have both seen more market cap evaporate from their recent highs.

If I told you that the mega-cap tech stocks lost $5 trillion, what would you have thought that meant for the overall market? For context, that’s a 38% drawdown from their peak. So given that, I don’t know, I’d probably assume the market was cut in half at least.

I would never have thought boring names in the healthcare and energy sector could offset so much of tech’s decline. In the last year, the biggest names in tech have lost $3.7T (NFLX, PYPL, NVDA, TSLA, META, MSFT, GOOG, AMZN). But over the same time, 49 companies have gained >$10B in market cap, for a collective $1.5T gain.

This list is, again, fairly boring names that you’d find in the Dow Jones Industrial Average, which is back with a vengeance. The Dow is outperforming the Nasdaq-100 by 21% year-to-date and is wrapping up the best month of relative outperformance since 2002! I definitely did not have that on my bingo card. Oh wait, I did (not to brag).

I’m only teasing, I got plenty of things wrong on that list. And even though I wrote that large value would outperform large growth by 20%, I wouldn’t have bet money on it. It seemed inconceivable at the time that Amazon would fall 40% and Facebook would fall 70%, while Chevron and Exxon did what they did. I mean, this chart. I’m looking at it, but I don’t believe it.

Nothing is too big to fail or too rotten to rise. Nothing is certain. Change is the only constant.

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