Congress Grilling Top ⅕ of SPX = End of Fundamental Analysis

“When the stock market and unemployment are both surging simultaneously, then SPX doesn’t reflect the economy.”
-talking head who thinks they’ve figured the market out

Yea. No kidding. Since when was SPX ever supposed to?

Most know by now that SPX doesn’t even reflect the S&P500 . SPX simply reflects in/outflows on 5 ticker symbols: MSFT , AAPL , AMZN , GOOG , FB . And these 5 stocks dominate the equity markets - in market cap size, breadth of ownership, market behavioral influence/ impact and real world influence/ impact - globally.

As index ETFs such as SPY , IVV and VOO continue to gain popularity and AUM at the expense of active management, combined with cap weighted rules based methodology that S&P uses for its index allocation, these passive funds have transformed the largest publicly traded stocks to essentially become glued together, such that the entire market essentially moves up/down as one singular monolith.

So, its amusing that Congress has also decided to take this same approach in their grilling of the CEOs from 4 of the big 5 (AAPL+ GOOG + AMZN + FB ), together as one. And its also amusing that these companies are being grilled because they are monopolies - a group of monopolies...? I don’t doubt that there are antitrust/anticompetitive behaviors taking place, but if you’re going to hold a congressional hearing on monopoly powers, maybe don’t do it as a group.

Maybe this is the start of a trend in which the real world is now trying to reflect the passive ETF correlated market. In a way, it is - these 4 companies have been under the same “break up” regulatory hammer risk, and Congress’s “cap weighted, passive indexation hearing,” combining and correlating different and distinct matters into one, is doing exactly what passive ETFs have done: make stock picking obsolete, as they’re all going to move together as one anyway.

Look at the image, and see if you can determine which chart belongs to which SPX individual. Point is- they’re basically all the same, despite having completely different biz models and products, but you’d never know by looking at just the charts without labels and prices. And if you’ve put capital (yours or someone else’s) into a company, and you cant even distinguish which is which, then I’m not saying don’t invest, but lets finally stop pretending that poring over minuscule details of fundamental analysis actually has an impact on stock prices.

Try the exercise- see if you can label each of the 4 blank stock charts beneath SPX on top.

Done? Whatever you guessed, you’re wrong.

Here are the answers:

These are not AAPL , AMZN , FB & GOOG . They’re the sub-megaweights of SPX: Home Depot ( HD ), Accenture ( ACN ), NIKE ( NKE ) and salesforce ( CRM )- again, businesses that have nothing to do with one another in the real world, but in the world of passive indexation (ETFs or Congress), there’s no distinction, and they all just move as one.

And here are the actual charts of SPX vs AAPL GOOG FB AMZN


Happy “stock picking”