One Drawback of the Market-Cap Weighted S&P 500 Index

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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.

The sector composition of the S&P :

Source: S&P

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.

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Source: 10 things every investor should know about investing workbook, John Hancock Investments

Related ETFs:

  1. SPDR S&P 500 ETF (SPY)
  2. iShares Core S&P 500 ETF (IVV)
  3. Vanguard S&P 500 ETF (VOO)

Disclosure: No positions

The World’s Leading Tire Manufacturers 2023

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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.

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Source: Tyre Express

On a related note, the following graphic shows the top 15 tire brands in the world.

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Source: Auto Car Pro

Disclosure: Long CTTAY

Infographic: Principal Mountains and Rivers in the World

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Infographics have become popular in recent years. In one page an infographic is able to show a ton of information in a clear and precise way. However infographics are not a new invention. I recently came across a fascinating infographic from the 1800s that shows the comparative height of mountains and lengths of rivers in the world. This single page also shows the data in a table in addition to the visual presentation.

For example, it shows the major rivers of the world such as the Amazon, Mississippi, Yangtse, Nile, etc. from their sources to their final destination including their length in miles. It also shows the top mountains of the world such as the peaks in the Himalayas, Mt. Blanc in the Alps, etc. with their country location and the altitude.

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Credit:

Title: New and Improved View of the Comparative Heights of the Principal Mountains and Lengths of the Principal Rivers in the World
Author: W. R. Gardner & William Darton
Location: London, England
Year: 1823

Via Datavis.ca