Do you remember the stock market of the late 1990s? At the time, stock indexes were rocketing higher, setting records. I remember all the buzz after the S&P 500 returned more than 20% for the third calendar year in a row. It was unprecedented. It was so unprecedented and so unlikely that many analysts were forecasting a down market or at least lower returns for that third year simply because three solid years in a row didn’t seem possible. At the time I pointed out that only a few large stocks were pushing the indexes higher. Because of the way the indexes are computed, the behavior of the largest companies dictates the returns of major indexes such as the S&P 500. Most stocks were flat or declined in value while the tech stock mania pushed Microsoft, Oracle, and a few others steadily higher.
Well, the same thing seems to be going on in the latest rally, and it’s due to one stock not the largest 10 or 20. Apple is dominating and overshadowing all the other stocks. Apple is doing so well that its earnings, profits margins, and other factors as well as its stock price growth are distorting the averages and making the entire market look better than it is.