The major indices opened at record highs yet again on Monday, with cyclicals like Financials, Industrials, and Materials all leading. The Dow Industrials have moved about 270 points or 1.3 percent since Thursday morning, when President Trump said he would have more news on a tax cut in the next few weeks. House Speaker Paul Ryan already said that no action would be forthcoming before spring at the earliest, but no matter. Just word that the president might have something soon is sending markets higher.
The S&P 500, the main index watched by professionals, topped $20 trillion in value for the first time this morning. The S&P 500 is the 500 largest stocks in the U.S., but there's about 4,000 companies that are actively traded. The Russell 3000, which is the largest 3,000 stocks that trade, has a market value of about $25 trillion. So the top 500 stocks have a value of about $20 trillion, and the remaining 2,500 have a value of only about $5 trillion more.
That tells you that the biggest stocks really are getting bigger.
Why is that? Partly, it is the triumph of indexing. The three largest ETFs that track the S&P 500—the SPDR S&P 500 (SPY), iShares Core S&P 500 (IVV), and Vanguard S&P 500 (VOO), collectively have about $358 billion in assets under management, about 14 percentof the $2.5 trillion in assets for the entire ETF industry. Because it's easy to push money into indexes, and the S&P 500 is the most well-known index, the big keep getting bigger.