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July 18, 2020, 9:50 a.m. EDT

Investors face ‘a scary, out-of-whack’ scenario — just look at this chart

‘Just as these stocks pulled up the entire market, they can pull down the entire market by their sheer weight’

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By Shawn Langlois, MarketWatch


Istockphoto
Where we're headed, nobody knows.

If it weren’t for the “Giant 5,” your money would have been better off sitting in cash than the stock market over the past few years, according to Wolf Richter of the Wolf Street blog .

Yes, investment gains since early 2017 have been completely dominated by Apple /zigman2/quotes/202934861/composite AAPL -2.97%  , Microsoft /zigman2/quotes/207732364/composite MSFT -2.34%  , Amazon /zigman2/quotes/210331248/composite AMZN -2.14%  , Alphabet /zigman2/quotes/205453964/composite GOOG -1.05%   and Facebook /zigman2/quotes/205064656/composite FB -2.61% to the point where the broader market, despite some wild fluctuations, has delivered virtually nothing without the upward push of those stocks.

For some perspective on how this has played out, here’s what the Wilshire 5000, a market-capitalization-weighted gauge of all U.S. stocks, has done since January 2017, minus the Giant 5:

That’s right... nothing.

“A miserable savings account would have outperformed the overall stock market without the Giant 5,” Richter said, “and would have done so without all the horrendous volatility of the two sell-offs.”

Read: He hates shorting, but this ‘terrible, gut-wrenching scenario’ has him doing it

In contrast, he said the Giant 5 Index has exploded for a gain of 184% over the same time frame, which has led to “breathtaking” market capitalizations and dominance.

But, as Richter explained, this can cut both ways. “That’s a scary thought — that this entire market has become totally dependent on just five giant stocks with an immense concentration of power that have now come under regulatory scrutiny,” he wrote. “And just as these stocks pulled up the entire market, they can pull down the entire market by their sheer weight.”

The stock market certainly wasn’t pulled down in Friday’s upbeat trading session, with the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.38% surging 369 points to end at 26,075 and the S&P 500 Index /zigman2/quotes/210599714/realtime SPX -0.80% adding 33 points to 3,185. The tech-heavy Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -1.69% banged out a third consecutive record close.

/zigman2/quotes/202934861/composite
US : U.S.: Nasdaq
$ 437.50
-13.41 -2.97%
Volume: 46.90M
Aug. 11, 2020 4:00p
P/E Ratio
33.25
Dividend Yield
0.75%
Market Cap
$1927.93 billion
Rev. per Employee
$1.98M
loading...
/zigman2/quotes/207732364/composite
US : U.S.: Nasdaq
$ 203.38
-4.87 -2.34%
Volume: 36.40M
Aug. 11, 2020 4:00p
P/E Ratio
35.31
Dividend Yield
1.00%
Market Cap
$1575.96 billion
Rev. per Employee
$902,473
loading...
/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 3,080.67
-67.49 -2.14%
Volume: 3.71M
Aug. 11, 2020 4:00p
P/E Ratio
118.41
Dividend Yield
N/A
Market Cap
$1576.88 billion
Rev. per Employee
$359,671
loading...
/zigman2/quotes/205453964/composite
US : U.S.: Nasdaq
$ 1,480.32
-15.78 -1.05%
Volume: 1.45M
Aug. 11, 2020 4:00p
P/E Ratio
33.02
Dividend Yield
N/A
Market Cap
$1017.84 billion
Rev. per Employee
$1.39M
loading...
/zigman2/quotes/205064656/composite
US : U.S.: Nasdaq
$ 256.13
-6.87 -2.61%
Volume: 28.22M
Aug. 11, 2020 4:00p
P/E Ratio
31.29
Dividend Yield
N/A
Market Cap
$749.10 billion
Rev. per Employee
$1.57M
loading...
/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,686.91
-104.53 -0.38%
Volume: 430.09M
Aug. 11, 2020 5:08p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,333.69
-26.78 -0.80%
Volume: 2.90B
Aug. 11, 2020 5:08p
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
10,782.82
-185.53 -1.69%
Volume: 3.90M
Aug. 11, 2020 5:16p
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Shawn Langlois is an editor and writer for MarketWatch in Los Angeles. Follow him on Twitter @slangwise.

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