According to Apollo’s Marc Rowan, S&P 500 investors are banking on a handful of stocks such as Tesla and Nvidia

According to Marc Rowan, the S&P 500 has become so concentrated that investors are essentially banking on a handful of mega-cap stocks like Tesla and Nvidia. 

In a recent interview, he told The Australian Financial Review, “I don’t even know if we have a stock market anymore – 10 stocks are like 35% of the US S&P 500, and 80% of volume is in the S&P 500.” 

“You’re not an investor, you’re a speculator,” remarked the CEO of Apollo Global Management.

The S&P 500 weights its constituents by market capitalization, which means that businesses with trillion-dollar market caps, such as Apple, Amazon, Alphabet, and Microsoft, have disproportionate impact among the roughly 500 stocks in the benchmark index.

Rowan also issued a warning to Australian investors, which is likely to apply to their US peers as well. Years of rock-bottom interest rates and reckless government spending meant “everything went up,” he added, but that’s no longer the case now that rates are up.

“The strategies that got you there are unlikely to get you there again,” Rowan stated.

During Berkshire Hathaway’s annual shareholders’ meeting in May, Warren Buffett delivered a similar message. He declared that the US economy’s “extraordinary” and “incredible” phase was finished, and that it was now in a “different climate” than six months ago.

It’s not surprising that Rowan and Buffett share similar outlooks, given that the Apollo CEO was partly inspired by Berkshire Hathaway.

Buffett’s conglomerate feeds its cash-hungry subsidiaries and funds its purchases of stocks, bonds, enterprises, and other assets using “float” — the money left over from its insurance firms after premiums are collected and claims are paid.

When Apollo acquired Athene, a retirement-services company, at the beginning of 2022, it established its own source of permanent money. The extra life-insurance and annuity payments collected by Athene are invested in by the asset manager.

Furthermore, in 2019, Apollo outbid Berkshire for Tech Data, demonstrating that Rowan and Buffett have comparable corporate preferences.

Buffett has not expressed the same concerns as Rowan about the S&P 500’s high concentration of Big Tech stocks. One reason could be that Berkshire owns over 6% of Apple, and the iPhone maker accounted for roughly 50% of its total stock portfolio worth — and 17% of its $1 trillion in assets — at the end of June.