It has become increasingly clear in recent years that big, mega-cap companies are dominating the stock market. With market capitalization reaching all-time highs, these large companies are increasingly the primary driver of stock performance. This has been especially true in 2020, when the market cap of the top five companies grew substantially with the emergence of the pandemic.
The term “mega-cap” refers to large companies that have a market capitalization greater than $200 billion. Companies that are considered “mega-cap” stocks have a staggering amount of influence over stock markets around the world. In the United States, the top five companies by market cap are Apple, Microsoft, Amazon, Alphabet, and Facebook. These five companies have seen their market capitalization grow to astronomically high levels this year, and their influence on the stock market is undeniable.
These mega-cap companies have a tendency to “dominate through market cap”. This means that the share price increases of these companies have a more dramatic effect on the overall market than smaller companies. This trend has become even more pronounced in 2020, as the top five companies saw their market capitalization nearly double since the start of the year. This unprecedented growth has been driven by a number of factors, including the shift to digital services, increased consumer demand for high-tech products, and the stock market rally spurred by the Federal Reserve monetary stimulus.
The implications of this trend are far-reaching. For one, it means that high-performing stocks from these companies represent a much larger share of the overall stock market. It also means that the stock market is becoming increasingly dependent on the performance of a handful of companies. This could lead to future market corrections if these companies experience any struggles. Finally, this trend has allowed these large companies to become the primary driver of stock market performance, which could create an uneven playing field for smaller companies looking to compete in the stock market.
In conclusion, it has become abundantly clear that mega-cap companies are playing a dominant role in the stock market. With their large market capitalization and increasing influence on stock performance, these companies are taking a lead role in stock market movements. As a result, it is important to monitor the performance of these companies as they continue to drive the direction of the stock market.