Hi! For this week’s ETF Wrap, I spoke with Strategas’s Todd Sohn on what the slide in the top weights in the S&P 500 index means for the exchange-traded fund industry. Also, Stephen Auth, chief investment officer of equities at Federated Hermes, weighed in on the firm’s market positioning heading into 2023.
More than $7 trillion of assets were indexed to the S&P 500 at the end of 2021, with weakness in megacap growth stocks, or equities known as “FANG,” causing “pain” to many investors in this year’s bear market, Sohn said in the note. So-called FANG stocks were popular in the bull market, an abbreviation referring to Facebook parent Meta Platforms Inc. META, -3.16%, Amazon.com Inc. AMZN, -4.34%, Netflix Inc. NFLX, -0.88% and Google parent Alphabet Inc. GOOG, -2.84% GOOGL, -2.77%. The acronym was later expanded to FAANG to include Apple Inc. AAPL, -3.00%, while another version, FAAMG, replaces Netflix with Microsoft Corp. MSFT, -3.30%.
Currently, the top 10 weights in the S&P 500 also include Berkshire Hathaway Inc. BRK.B, -2.41% followed by UnitedHealth Group Inc. UNH, -0.49%, Johnson & Johnson JNJ, -0.82%, Exxon Mobil Corp. XOM, -2.40%, Nvidia Corp. NVDA, -8.43% and Tesla Inc. TSLA, -9.35%, his note shows. Other popular healthcare ETFs this year have included the iShares Biotechnology ETF IBB, -0.49% and iShares U.S. Medical Devices ETF IHI, -1.03%, Sohn said.But many investors in ARK Investment Management founder Cathie Wood’s flagship ARK Innovation ETF ARKK, -4.91% seem to have remained “loyal” despite the fund’s dismal performance since its peak last year, according to Sohn.