Below is a chart showcasing the Top 10 names by market capitalization and their Year-to-Date (YTD) performance up to January 15, 2025, compared to the S&P 500 total return:
Source: Ycharts
It’s noteworthy that the three largest companies by market cap—Microsoft (NASDAQ:), Nvidia (NASDAQ:), and Apple (NASDAQ:)—are all trailing the S&P 500 in YTD performance. Specifically, Apple faced significant declines on January 16, 2025, with its shares dropping 3.5% and QQQ falling 4%.
The rankings for the Top 10 names by market cap, based on YTD performance in 2025, from best to worst, are as follows:
- Meta (NASDAQ:) (Meta): +4.4%
- Tesla (NASDAQ:): +2.47%
- Berkshire Hathaway B (NYSE:): +2.10%
- Alphabet Inc Class C (NASDAQ:): +2.08%
- Alphabet Inc Class A (NASDAQ:): +1.91%
- S&P 500 (SPXTR): +1%
- Microsoft (MSFT): +0.73%
- Amazon (NASDAQ:): +0.58%
- Nvidia (NVDA): -0.54%
- Broadcom (NASDAQ:): -0.85%
- Apple (AAPL): -8.85%
Source: Ycharts, as of Thursday close, January 15, 2025
It is particularly interesting that the top three companies by market capitalization are the ones most underperforming in YTD 2025. Together, they constitute approximately 19%-20% of the S&P 500’s market cap and 25%-26% of the QQQ’s market cap.
Readers might want to keep an eye out for “rotation,” which refers to shifts away from large-cap growth and tech stocks into other asset classes, such as mid-cap and small-cap stocks, whether they are growth or value, and international equities as well.
StyleBox Update:
The spreadsheet above tracks the blog’s annual returns across various asset classes, providing insights into potential market rotations from large-cap growth to other equity categories.
As of the end of 2024, there is no solid evidence of a rotation occurring yet.
The style-box returns reflect the ongoing trends of the secular bull market that began either on March 9, 2009, or January 1, 2010.
To determine any significant shifts in expectations, we will likely need to analyze Q4 2024 earnings and guidance from the top 10 names in the S&P 500.
Top 10 Client Holdings:
This blog has maintained a cautious stance regarding the AI boom and the Nvidia/semiconductor trade since last summer. This caution might have been premature, as Taiwan Semiconductor recently reported a strong quarter with better-than-expected revenue guidance. Meanwhile, Micron’s stock remains resilient despite poor guidance and estimate downgrades.
Here are the top 10 holdings for clients as of December 31, 2024:
- JP Morgan Income (JMSIX) Bond fund: ’24 return +7.73%
- JPMorgan Chase & Co (NYSE:): +43.63% total return in ’24
- Amazon (AMZN): +44.39% total return in ’24
- Invesco QQQ Trust (NASDAQ:) (ETF): +25.58% total return in ’24
- Microsoft (MSFT): +12.91% total return in ’24
- Tesla (TSLA): +62.52% total return in ’24
- Netflix (NASDAQ:): +83.67% total return in ’24
- Charles Schwab Corp (NYSE:): +9.03% total return in ’24
- Alphabet (GOOGL): +35.94% total return in ’24
- Walmart (NYSE:): +73.51% total return in ’24
- iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSE:): +0.86%
- SPDR® S&P 500® ETF Trust (ASX:): +24.89% YTD return
Most clients maintain balanced accounts following a 60% equity / 40% fixed income allocation, and adjustments are made based on market trends.
The JP Morgan Income Fund (JMSIX) outperformed the Barclays Aggregate by approximately 650 basis points in 2024, which reflects the “credit over duration” strategy that is sustainable only as long as the US economy remains robust.
One notable adjustment was the decrease in Microsoft’s allocation during the third quarter of 2024, due to its significant investments in AI capital expenditures and the lukewarm reception of the CoPilot launch. While Satya Nadella has excelled in cloud services and Azure, I have concerns about the transition to AI.
Some larger clients possess fully equity portfolios, impacting the Top 10 holdings heavily.
Many of these positions have been maintained for several years.
Summary / Conclusion:
The previous Top 10 holdings update was published back in early July 2024, when this blog became more cautious about the large-cap growth trend. However, large-cap and growth still achieved strong performance over the entirety of 2024.
Observing the style box reveals a notable difference between large-cap growth and value stocks during the latter half of 2024, as large-cap value struggled to maintain its footing.
This post-COVID rally in US equities has largely been driven by AI, Nvidia, and semiconductors, and I personally refrain from heavily investing in that sector, save for smaller trades in larger accounts.
In most clients’ balanced portfolios, the financial sector represents the largest overweight compared to the S&P 500’s financial sector allocation of 13%, which proved beneficial in late 2024. Some holdings in JP Morgan are being reduced at the start of 2025, while stocks like Schwab (SCHW) and the KRE (regional bank ETF) should perform better with a steeper yield curve, and still remain beneath their peak prices from 2021.
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This content is for informational purposes only and should not be interpreted as investment advice or recommendations. Past results are not indicative of future performance. Investing carries risks, including the potential loss of principal. All return data and style-box information are sourced from Morningstar. Please note that the information provided may not be updated regularly, if at all.
