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#17 - Shedding Light on Economic Dystopian Mavens

Updated: Sep 5, 2023

There’s some more fear mongering going on by the Economic Dystopian mavens in commenting on indexes, and essentially stating that without the top 7 stocks in the SP500, the economy is in the toilet by a couple %. They calculated this number by taking the current return% of those seven within the index, minus the return % the index, and then blindly assuming that the other 496 companies combined are taking a loss. This quite literally is a lie.

Holding the winners and none of the losers is generally their way of saying the world is going to collapse soon. They scream wolf about until there is finally a wolf (and ignoring all the times it wasn’t a wolf), then proclaiming how right they were the whole time (while ignoring how often they were wrong). It shouldn’t be skipped that the idea of holding only the winners and none of the losers is generally perpetuated by folks like this - generally day traders, the constant news cycle talking heads, and folks trying to sell you their system on market timing.

So, let’s take a little bit of a different take. The price return of the S&P 500 YTD at the time of writing (03JUL2023 16:26) is 16.51% to the positive. The index holds 503 of the largest companies in the USA by total valuation, and is regularly re-balanced. By looking at component YTD returns, we can see which companies have performed equal to or greater the index gain YTD.

141 companies within the index have individually beat the average of the SP500 return of 16.51%. 48 companies have lost greater than 16.51% individually this year. Within this “band” of equal-but-opposite returns (absolute value from algebra) measured by %, 66% of companies are producing a profit.

201 companies within the index have individually returned greater than 10% YTD. 91 companies have lost greater than 10% YTD. Within this “band” of equal-but-opposite returns measured by %, 54% of companies are producing a profit.

158 companies have returned between 0-10% YTD when counted individually. 110 companies have lost between 0-10% YTD using the same method. Within this “band” of equal-but-opposite returns measured by %, 30% of companies are producing a profit.

300 companies have returned better than 0% YTD when counted individually. 203 companies have losses YTD using the same metric. When counted from a gain/loss perspective 33% of companies within the SP500 are producing a profit.

It is absolutely true that the top stocks in the SP500 have dramatically increased in valuation (the top 5 are triple digit territory)- but it is a farce to try and manipulate numbers to insinuate that the rest of the index are essentially loosing money. Be wary of statistics from those who make their money off of fear and allude to having the answers. The best thing you’ll ever take from a statistics class is seeing some of the ways numbers can be manipulated based off the intent, and that it’s important to think critically for yourself.

Additionally, not understanding how an index changes over time, or what other indexes may exist, can exacerbate this sort of falling-sky attitude at all times of the year. It is absolutely possible to hold practically every single stock in the US with a single ticker symbol, and every liquid single publicly traded stock in the Global markets with a single ticker symbol as well.

All numbers were calculated by hand with price return only for the simplicity of a ~ 550 word post.


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