Investing in equities and bonds is one of the best ways to grow wealth. This is especially true when it comes to long-term. Over many years or decades due to the effect of compounding stocks have historically generated the highest returns over bonds and other assets. The following chart shows the growth of $1 from 1926 to 2022. Small caps had a higher return than large caps in this long period. The chart also shows the return on bonds and T-Bills together with inflation.
The S&P 500 is the benchmark index of the US equity market. The index is considered as the barometer of the economy. Since it is diversified with all the major industries represented it is a true representation of the American economy. However there is one major drawback in the construction of the S&P 500. This is because the index is Market-Cap Weighted. This means stocks with higher market capitalization have a bigger impact on the index. Or to out it in another way companies with largest market capitalizations have the largest weight in the index.
Currently the tech sector accounts for the largest weight in the index and the companies with the largest market caps are: These are Apple(AAPL), Amazon(AMZN), Microsoft(MSFT), Alphabet (GOOGL). Tesla(TSLA), Meta Platforms Inc (META) and NVIDIA Corp (NVDA). As these stocks have soared this year, so has the S&P 500. The index is up over 20% YTD. If we exclude these firms, the return of the index is average.
When the largest constituents in the S&P 500 go higher and higher in prices naturally the overall index price also increases. But high concentrations of certain sectors also can lead to dramatic crashes. The past two bear markets are examples of this scenario. High concentrations in the tech and financial sectors led to the two bear markets that were brutal to say the least.
The World’s Leading Tire Manufacturers based are revenue are shown in the chart below. There have been not much changes at the top of this list. As in previous years, French tire maker Michelin(MGDDY) ranked the top followed by Bridgestone (BRDCY) of Japan and Goodyear(GT) of the US and Germany’s Continental (CTTAY).
I recently learned that tires on Electric Vehicles (EVs) wear out sooner than those on ICE cars. This is because the weight of the EVs are much higher due to the heavier batteries they carry. So EV owners that own Tesla(TSLA) and other brands need to change their tires often. From an investment standpoint, this fact adds one more reason to own stocks of tire makers.
