There's been a lot of talk recently about how Technology has been lagging the market since last fall. If you look at comparison between the performance of the S&P 500 and the "tech heavy" Nasdaq 100, it is clear that the S&P 500 has clearly been outperforming. Since the start of August, the S&P 500 has risen by close to 10%, while the Nasdaq 100 is up by just slightly more than half that amount (5.26%).
Using the Nasdaq 100's performance as a proxy for Technology may not be the most accurate gauge of how Technology is doing, though. Because shares of Apple (AAPL) account for about 20% of the Nasdaq 100, it is probably more accurate to call the index AAPL heavy than tech heavy. Taking a different approach, in the chart below we compared the performance of the Nasdaq 100 to the performance of the each of the index's components on an equally-weighted basis. Here, each stock has the same weighting, so rather than having a 20% weighting in the index, AAPL is just like every other stock and only has a 1% weighting. Based on this approach, the Nasdaq 100's performance looks considerably better with a gain of 15.43% compared to 5.26% for the Nasdaq 100 weighted index.
Comparing the performance of the Nasdaq 100 equal-weighted index to the S&P 500 shows that Technology (using Nasdaq 100 stocks as a proxy) is doing rather well.
In order to make a true apples to apples comparison between the two indices, we should also look at the performance of the S&P 500 on an equally-weighted basis. In the chart below, we show the performance of the S&P 500 and compare it to the performance of the Nasdaq 100 and S&P 500 equal-weight indices. Here, it is interesting to note that going back to the start of August both equal-weight indices have performed right inline with each other. While the Nasdaq 100 equal weight index is up 15.43%, the S&P 500 equal-weight index is up less than 100 bps more with a gain of 16.11%. With these charts in mind, next time you hear someone moaning about how tech stocks are underperforming, it is probably safe to assume that they, like the Nasdaq 100, have a portfolio full of AAPL.
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