Those tech giants have beaten the broader market each of the first five months of 2023 and have crushed the S&P 500 overall. However, that astounding outperformance has made many market watchers worried that the S&P 500's gains could suddenly unwind if those firms can't maintain their momentum, wrote Brian Belski, BMO's chief investment strategist, in a May 30 note.when large-cap leaders fall back toward the pack.
In fact, the S&P 500 has climbed during 11 of the last 12 times in which breadth narrowed, Belski noted, adding that stocks were also more likely to rise when breadth broadened out.Not only is the risk of weak market breadth overblown in Belski's view, but the strategy chief also pointed out that mega-cap dominance has historically served as jet fuel for the S&P 500.
When the index's five biggest stocks lead for five straight months or longer, that strength has historically tricked down. Such scenarios have put the S&P 500 in positive territory 100% of the time in the following three and six months, with returns of at least 6%, Belski noted. And in the year following a five-month hot streak for the S&P 500's five largest companies, the index has surged by an average of over 22% and has fetched returns of more than 20% in three of the last four instances, according to BMO Capital Markets.
Below are 11 stocks that are the newest additions to BMO's model portfolios or stock pick lists, along with the ticker, market capitalization, price-to-earnings ratio, and group for each.
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