S&P 500 investors are betting on a handful of stocks like Tesla and Nvidia, Apollo’s Marc Rowan warns – DIGIWIZ CENTRAL

S&P 500 investors are betting on a handful of stocks like Tesla and Nvidia, Apollo’s Marc Rowan warns

Marc Rowan.

Kevork Djansezian/Reuters

The S&P 500 is dominated by a handful of Big Tech companies like Apple and Amazon.
Investors in the index are speculating on just a few companies, Apollo’s Marc Rowan says.
Rowan says it’s a tougher backdrop today, echoing one of his key influences, Warren Buffett.

The S&P 500 has become so concentrated that investors are basically betting on a handful of mega-cap stocks like Tesla and Nvidia, Marc Rowan has warned.

“I don’t even know if we have a stock market anymore – 10 stocks are like 35% of the US S&P 500, and 80% of volume is in the S&P 500,” he told The Australian Financial Review in a recent interview.

“You’re not an investor, you’re a speculator,” the Apollo Global Management CEO added.

The S&P 500 weights its constituents by market capitalization, meaning companies with trillion-dollar market caps like Apple, Amazon, Alphabet, and Microsoft have outsized influence among the roughly 500 stocks in the benchmark index.

Rowan also issued a caution to Australian investors that likely pertains to their US peers too. Years of rock-bottom interest rates and carefree government spending meant “everything went up,” but that’s no longer the case now rates are higher, he said.

“The strategies that powered you along the way are unlikely to power you going forward,” Rowan said.

Warren Buffett shared a similar message during Berkshire Hathaway’s annual shareholders’ meeting in May. He declared an “extraordinary” and “incredible” period for the US economy was over, and said it was a “different climate” compared to six months earlier.

It’s little surprise that Rowan and Buffett have similar outlooks, given the Apollo chief has partly modeled his company on Berkshire.

Buffett’s conglomerate uses “float” — the money left over from its insurance businesses after premiums are collected and claims are paid — to feed its cash-hungry subsidiaries and fund its purchases of stocks, bonds, businesses, and other assets.

Apollo secured its own source of permanent capital when it acquired Athene, a retirement-services business, at the start of 2022. The asset manager takes the excess life-insurance and annuity payments gathered by Athene and uses them to make investments.

Moreover, Apollo outbid Berkshire for Tech Data in 2019, underscoring that Rowan and Buffett have similar tastes in businesses.

Buffett hasn’t voiced the same concerns as Rowan about the intense concentration of Big Tech in the S&P 500. One reason might be that Berkshire owns nearly 6% of Apple, and the iPhone maker accounted for roughly 50% of the total value of its stock portfolio — and 17% of its $1 trillion of assets — at the end of June.

Read the original article on Business Insider
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