But the S&P 500’s reach is even more limited now than usual. Beyond the handful of technology giants that make up nearly a third of the index, market concentration is rising across industries. The winners are amassing market share — and with it more pricing power, which helps when faced with the prospect of a trade war raising input costs.
If you’re looking to a popular stock market tracker like the S&P 500 Index to gauge the effect of US President Donald Trump’s proposed tariffs, don’t. It’s likely to be insulated from much of the fallout and therefore fail to reflect the true impact on US businesses.
The S&P 500 is synonymous with the US stock market for many people, but it has never been representative of the broad market. It excludes most of the roughly 4,000 US stocks. It also weights its constituents by market value, giving bigger companies more representation in the index than smaller ones. About 100 companies make up roughly 75% of the index by weighting.
