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Concentration Works Both Ways

Ian Tam analyzes the U.S. and Canadian recoveries and discovers something interesting.

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Ian Tam: Despite a bleak economic outlook, in August, the S&P 500 not only recovered from the COVID-19 dip, but it's actually surpassed its previous highs. Many say that this is due to the outperformance of technology stocks. Today, we'll have a look at how true that actually is.

This first chart shows the five stocks that make up almost 25% or a quarter of the S&P 500 Index. These stocks include Apple, Facebook, Amazon, Google, and Microsoft. To understand the impact of these stocks on the index's performance, I use Morningstar CPMS to run a back test with the intent of replicating the index but without these five stocks.

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Ian Tam does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.