In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
New Lows for Big Tech
When it comes to the most important stocks, it’s all about tech. Mega cap technology companies dominate the US indexes and are in just about everyone's portfolio. The chart below illustrates just how paramount their performance is for the broader market. We have overlaid the relative trend between technology stocks and the S&P 500 with the Nasdaq 100 on absolute terms.
While the chart shows less than a year of data, the correlation between the two is consistently strong throughout all of history. This makes perfect sense as technology stocks represent roughly half of the weighting in the Nasdaq. Not only did we see new lows in a growing number of large cap tech stocks last week, but the group also made new 52-week relative lows at the index level. This kind of relative weakness tells us we should expect further downside for the market’s largest stocks. If that’s the case, the major averages and broader market are likely under pressure too.
