I came across the below infographic on US inflation since the 1960s. Last year when inflation started creeping up the Fed said repeatedly it was only “transitory”. Now it has become permanent and they are unable to get it under control. Raising interest rates a little bit is not going to help. With sky high gas prices it may not be shock if we end up with a recession.
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Source: Visual Capitalist
One of the popular myths in the field of equity investing is that large companies are too big to fail. Nothing could be farther from the truth. Over and over again this has proven to be correct. For instance, during the dot com boom peak in 2000, tech giants Cisco(CSCO) and Intel (INTC) were in the top 10. But by 2005, they were gone from the list.
Similarly GE(GE) was the top firm in 2005. By 2020 it got kicked out as well.
The Top 10 firms in the S&P 500 continues to change over the years from 1980 as shown in the table below:
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Data Source: S&P Dow Jones, Spheria
Source: Size doesn’t matter when it comes to risk, Gino Rossi, Firstlinks
The key takeaway is that no firm is too big to fail and that today’s best would be tomorrow’s worst. So investors have to keep this mind and make portfolio allocations accordingly. It is never a good idea to put most of one’s assets in the top firms in the hope that nothing would uproot them.
Related ETF:
SPDR S&P 500 ETF Trust (SPY)
Disclosure: No Positions
Global equity markets have stabilized in the past few after having a few rough weeks since the Russian invasion of Ukraine. Unlike last year, markets this year started on shaky note facing a multitude of headwinds from inflation to interest rate raises. Then came the shock of a new year in Europe. It remains to be seen how the rest of the year plays out.
The S&P 500 is still down about 7% YTD. Most European markets strengthened as well last week. The DAX index is off by around 9% so far this year. With that said, below are a few interesting reads for the weekend:
Horse Wagon