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Transcript20 lines

[00:01]
A
Deal replaces fragmented payroll vendors with one global system. No third parties hire, manage and pay teams in 150 plus countries. Operate like a local everywhere. Visit deel.com WSJ
[00:18]
B
this is yous Money Matters from the Wall Street Journal.
[00:24]
C
Welcome to youo Money Matters. I'm Annemarie Fertoldi in New York. Tech giant Amazon has driven more than a quarter of the S&P 500 hundreds gains in 2018, and it's in the running to become the first US company with a trillion dollar valuation. But Amazon's gains have some investors worried about other sectors of the economy like manufacturing and oil production. Joining me now in our studio is Wall Street Journal reporter Akane Ohtani. Akane, first, can you start by breaking down just how well Amazon has been doing lately? I mean, it's responsible for a huge chunk of the S&P's gains this year.
[01:00]
B
Yeah, I have to say I was surprised when I saw the numbers and how they broke down. So far this year, Amazon has accounted for about 27% of the S&P 500's gain. S&P 500 is up about 1%. And then we have Microsoft, which is responsible for about 13% of the total gains, and Netflix responsible for about 8%. So you have three big tech sort of focused stocks and they've powered almost half of the entire stock market's gains this year.
[01:29]
C
And that's despite the recent volatility we saw. They're still seeing pretty incredible gains.
[01:33]
B
Yeah, I mean, most of these stocks are vastly outperforming the rest of the S&P 500. Amazon, Netflix and Microsoft were all up double digit percentages last year. And I think a lot of people thought they would take a bit of a cooler in 2018. That's pretty normal for things that have really outperformed to sort of take a breather. But they're all outperforming the S&P 500 this year. So they've really continued this streak of tech outperforming.
[02:00]
C
How unusual is it for a sector to be at the top like this for so long?
[02:05]
B
Well, I mean, it's not entirely out of the ordinary. We saw Apple very much playing this role in 2015, 2016. And you know, just as it did back then, it sort of renewed this question of is it healthy or is it normal for one sector or even just three stock to power so much of the broad stock market's gains? And I think one, one thing that people have brought up as being potential potentially concerning about this situation is that the economy is actually in a pretty good shape right now. I mean, people are saying the global economy is on pace to accelerate again. The US Economy looks pretty solid. Corporate earnings look good. And so you would expect the gains to be spread out across all industries, particularly things whose businesses tend to pick up as the economy improves. So that includes things like industrial firms and manufacturing firms and oil production firms. But those firms have actually lagged behind. And so a couple of the investors I spoke who were saying, well, maybe that means people aren't actually as confident as you would hope for about the prospects of future growth.
[03:10]
C
As you write in your piece, investors are concerned about the tech sector's dominance. But this has happened before. Have we seen their worst fears play out?
[03:19]
B
We have to a certain degree. So even just last year, technology was again the best performing sector in the S&P 500. We saw it finish the year up about 37%. And that's nearly double of what the S&P 500 gained over the course of 2017. And we did see because of tech's dominance, there were times when there was a broad sell off in technology stocks. People were selling everything from Apple to Microsoft to Facebook to biotech firms. And that had a huge drag on the overall direction of the stock market. There were a couple really choppy days for tech in particular last summer. And so I think that's the danger sometimes that people are afraid of is if one sector is really dominating the stock market and it really carries a disproportionate pull over the direction of the stock market, that if it does stop rising, that the overall market will also take a turn for the worse.
[04:16]
C
I've been speaking with Wall Street Journal reporter Akane Ohtani, and you're listening to youo Money Matters from the Wall Street Journal. Welcome back, Akani. We've been talking about how investors are concerned about the tech sector's success and how that's impacting other sectors, especially energy. So what are we seeing so far in 2018?
[04:39]
B
So energy is another one of those areas that people expected to reverse course this year. And in this case, people were expecting energy shares to start rising again. They were one of the biggest laggards in 2017. And so just as some people thought tech, after a really strong run would sort of cool it a little bit in 2018, people were thinking energy, which was a huge laggard, would start rising again in 2018. But that hasn't happened. And that's been a little bit concerning to some investors because oil prices have actually stabilized after really falling in 2014 and 2015. And so you'd think that the prospects for energy companies is picking up. And in fact, we are seeing improved earnings results among those sectors. But it seems like investors are still a little bit reluctant to get back into that sector.
[05:26]
C
What other effects is the rise of the tech sector having on U.S. markets?
[05:31]
B
I think one interesting effect is that it's actually affecting the overall composition of the S&P 500. So we've been discussing with S and P, Dow Jones Indices, which controls what the S&P 500 looks like in the past, about their future plans for the index. And one of the things that's going to happen later this year is that they're actually going to revamp the S&P 500 telecom sector because as so many tech companies sort of merge into other industries, increasingly there isn't necessarily a thing that's a straightforward tech company or a straightforward telecom company or even a retail company like Amazon, which kind of has its arms and legs in retail and healthcare and all sorts of industries at this point. So the dominance of tech is actually not just about how much of The S&P 500 gains have been contributed by the tech sector, but it's also about what The S&P 500 is like looking like.
[06:29]
C
So, Akani, history shows us that this isn't likely to last forever, the dominance of the tech sector. So what are investors you've been speaking to expecting to happen?
[06:38]
B
I think as much as some people would like there to be more of a shakeup in the leadership in the stock market, the reality is the numbers for these big tech companies, in particular, the ones that are leading the S&P 500 right now, look really good. Amazon, Netflix, and Microsoft all reported very strong earnings at the beginning of this year and by all indications are going to continue to grow in future quarters. So as far as these three companies go, I mean, it looks like the outlook is incredibly bright. But you know, that being said, nothing lasts forever. And we've, you know, as we've seen in the sort of reversal of fortunes for other previously popular investments like Apple and Facebook, it is very possible that unforeseen news events will sort of chip away at some of the gains that we've seen in the, in the leaders of the stock market this year.
[07:29]
C
I've been speaking with Wall Street Journal reporter Akane Ohtani. Thanks so much, Akani.
[07:33]
B
Thanks for having me.
[07:34]
C
And thank you for listening to youo Money Matters. I'm Annemarie Fertoldi in New York for the Wall Street Journal.
[07:40]
A
Deal replaces fragmented Payroll vendors with one global system. No third parties, hire, manage and pay teams in 150 plus countries. Operate like a local everywhere. Visit d e e l.com WSJ.

Summary5 min read

WSJ Your Money Briefing

Episode: The Amazon Effect on the Stock Market

Date: February 23, 2018
Host: Annemarie Fertoli
Guest: Akane Otani, Wall Street Journal Reporter

Episode Overview

This episode focuses on the profound impact Amazon and other major tech companies are having on the US stock market in early 2018. Annemarie Fertoli speaks with WSJ reporter Akane Otani to unpack the outsized role Amazon (and peers like Microsoft and Netflix) play in driving S&P 500 gains, investors' concerns about this tech dominance, the knock-on effects on other sectors, potential rebalancing of the S&P, and what history and current trends suggest for the future.

Key Discussion Points & Insights

Amazon and Tech's Outsized Impact (00:23–01:29)

Amazon has been responsible for a staggering 27% of the S&P 500’s gains in 2018, despite the overall market being up just 1%.
Microsoft contributed about 13%, while Netflix contributed 8%—meaning these three stocks powered nearly half of all gains for the year so far.
Quote:
“I have to say, I was surprised when I saw the numbers and how they broke down… [These three] have powered almost half of the entire stock market’s gains this year.”
—Akane Otani (00:59)
The sustained double-digit gains from these companies surpass broader market performance, defying expectations that they would "take a breather" after stellar runs in 2017.

Is Sector Dominance Unusual? (01:59–03:10)

Historically, it’s not entirely out of the ordinary for a sector to dominate: Apple played a similar role in 2015–16.
However, this concentration of gains raises concerns:
- Economic conditions overall look strong—robust global and US growth, solid corporate earnings.
- Normally, cyclical sectors (industrial, manufacturing, energy) would share in the gains, but instead, they’re lagging noticeably.
- This imbalance leads some to question whether investor confidence about broader economic prospects is less robust than headline numbers suggest.
Quote:
“You would expect the gains to be spread out across all industries, particularly things whose businesses tend to pick up as the economy improves... But those firms have actually lagged behind.”
—Akane Otani (02:41)

Risks: What Happens If Tech Falters? (03:10–04:15)

The current dominance of technology stocks is reminiscent of 2017, when tech gained 37%—almost double the S&P average.
The risk: when dominant tech stocks face a selloff (as happened last summer), the overall market suffers sharply.
Large, broad-based tech selloffs can drag down not just tech, but also companies in related industries—all because of the tech sector’s disproportionate influence.
Quote:
“If one sector is really dominating... if it does stop rising, the overall market will also take a turn for the worse.”
—Akane Otani (03:58)

Tech’s Effect on Other Sectors, Esp. Energy (04:39–05:26)

Expectations were high for energy shares to recover in 2018 after lagging in previous years, especially given stabilized oil prices and better earnings.
Despite positive signals, investors remain hesitant to shift allocations away from tech into energy, highlighting lingering skepticism or perceived risk.
Quote:
“You’d think that the prospects for energy companies is picking up... but it seems like investors are still a little bit reluctant to get back into that sector.”
—Akane Otani (05:14)

Broader Market Composition and Sector Redefinition (05:30–06:28)

The dominance of tech firms is fundamentally changing the S&P 500’s makeup.
Indices are being reconstituted: later in 2018, the S&P 500 telecom sector will be revamped, reflecting the blurred lines as “tech” companies (like Amazon) expand across traditional sector boundaries—into retail, healthcare, and more.
Quote:
"...increasingly, there isn't necessarily a thing that's a straightforward tech company or a straightforward telecom company... Amazon has its arms and legs in retail and healthcare and all sorts of industries at this point."
—Akane Otani (05:54)

What Investors Expect for Tech Leadership (06:28–07:28)

While some hope for a broader market leadership shakeup, the financial fundamentals for Amazon, Netflix, and Microsoft remain strong, with solid recent earnings and a bright outlook.
However, sector dominance is cyclical—unexpected news or market events could shift leadership just as has happened in the past (e.g., Apple, Facebook).
Quote:
“As far as these three companies go, it looks like the outlook is incredibly bright. But... nothing lasts forever.”
—Akane Otani (07:00)

Notable Quotes & Memorable Moments

“Amazon has accounted for about 27% of the S&P 500’s gain.”
— Akane Otani (00:59)
“If one sector is really dominating the stock market... if it does stop rising, the overall market will also take a turn for the worse.”
— Akane Otani (03:58)
“It seems like investors are still a little bit reluctant to get back into that [energy] sector.”
— Akane Otani (05:14)
“Increasingly, there isn’t necessarily a thing that’s a straightforward tech company... Amazon has its arms and legs in retail and healthcare and all sorts of industries at this point.”
— Akane Otani (05:54)
“Nothing lasts forever... it is very possible that unforeseen news events will sort of chip away at some of the gains that we’ve seen in the leaders of the stock market this year.”
— Akane Otani (07:10)

Segment Timestamps

00:23–01:29 — Amazon, Microsoft, and Netflix’s contribution to S&P 500 gains
01:29–03:10 — Historical context and concerns about sector concentration
03:10–04:15 — Risks of heavy tech market leadership
04:39–05:26 — Energy sector performance and tech’s impact on other industries
05:30–06:28 — The changing composition of the S&P 500 and sector definitions
06:28–07:28 — Investor expectations and likelihood of a shift in leadership

Summary Takeaway

This episode provides an in-depth look at how a handful of tech giants, led by Amazon, have shaped stock market returns in early 2018—and what that concentration means for the rest of the market. While the fundamentals for these leaders remain strong, guests and hosts alike acknowledge the underlying risks of such sector dominance and the potential for sudden shifts when market sentiment changes. Investors and market committees are already adapting to a world where sector definitions blur, and leadership cycles are more volatile than ever before.

Loading summary

Transcript20 lines

[00:01]
A
Deal replaces fragmented payroll vendors with one global system. No third parties hire, manage and pay teams in 150 plus countries. Operate like a local everywhere. Visit deel.com WSJ
[00:18]
B
this is yous Money Matters from the Wall Street Journal.
[00:24]
C
Welcome to youo Money Matters. I'm Annemarie Fertoldi in New York. Tech giant Amazon has driven more than a quarter of the S&P 500 hundreds gains in 2018, and it's in the running to become the first US company with a trillion dollar valuation. But Amazon's gains have some investors worried about other sectors of the economy like manufacturing and oil production. Joining me now in our studio is Wall Street Journal reporter Akane Ohtani. Akane, first, can you start by breaking down just how well Amazon has been doing lately? I mean, it's responsible for a huge chunk of the S&P's gains this year.
[01:00]
B
Yeah, I have to say I was surprised when I saw the numbers and how they broke down. So far this year, Amazon has accounted for about 27% of the S&P 500's gain. S&P 500 is up about 1%. And then we have Microsoft, which is responsible for about 13% of the total gains, and Netflix responsible for about 8%. So you have three big tech sort of focused stocks and they've powered almost half of the entire stock market's gains this year.
[01:29]
C
And that's despite the recent volatility we saw. They're still seeing pretty incredible gains.
[01:33]
B
Yeah, I mean, most of these stocks are vastly outperforming the rest of the S&P 500. Amazon, Netflix and Microsoft were all up double digit percentages last year. And I think a lot of people thought they would take a bit of a cooler in 2018. That's pretty normal for things that have really outperformed to sort of take a breather. But they're all outperforming the S&P 500 this year. So they've really continued this streak of tech outperforming.
[02:00]
C
How unusual is it for a sector to be at the top like this for so long?
[02:05]
B
Well, I mean, it's not entirely out of the ordinary. We saw Apple very much playing this role in 2015, 2016. And you know, just as it did back then, it sort of renewed this question of is it healthy or is it normal for one sector or even just three stock to power so much of the broad stock market's gains? And I think one, one thing that people have brought up as being potential potentially concerning about this situation is that the economy is actually in a pretty good shape right now. I mean, people are saying the global economy is on pace to accelerate again. The US Economy looks pretty solid. Corporate earnings look good. And so you would expect the gains to be spread out across all industries, particularly things whose businesses tend to pick up as the economy improves. So that includes things like industrial firms and manufacturing firms and oil production firms. But those firms have actually lagged behind. And so a couple of the investors I spoke who were saying, well, maybe that means people aren't actually as confident as you would hope for about the prospects of future growth.
[03:10]
C
As you write in your piece, investors are concerned about the tech sector's dominance. But this has happened before. Have we seen their worst fears play out?
[03:19]
B
We have to a certain degree. So even just last year, technology was again the best performing sector in the S&P 500. We saw it finish the year up about 37%. And that's nearly double of what the S&P 500 gained over the course of 2017. And we did see because of tech's dominance, there were times when there was a broad sell off in technology stocks. People were selling everything from Apple to Microsoft to Facebook to biotech firms. And that had a huge drag on the overall direction of the stock market. There were a couple really choppy days for tech in particular last summer. And so I think that's the danger sometimes that people are afraid of is if one sector is really dominating the stock market and it really carries a disproportionate pull over the direction of the stock market, that if it does stop rising, that the overall market will also take a turn for the worse.
[04:16]
C
I've been speaking with Wall Street Journal reporter Akane Ohtani, and you're listening to youo Money Matters from the Wall Street Journal. Welcome back, Akani. We've been talking about how investors are concerned about the tech sector's success and how that's impacting other sectors, especially energy. So what are we seeing so far in 2018?
[04:39]
B
So energy is another one of those areas that people expected to reverse course this year. And in this case, people were expecting energy shares to start rising again. They were one of the biggest laggards in 2017. And so just as some people thought tech, after a really strong run would sort of cool it a little bit in 2018, people were thinking energy, which was a huge laggard, would start rising again in 2018. But that hasn't happened. And that's been a little bit concerning to some investors because oil prices have actually stabilized after really falling in 2014 and 2015. And so you'd think that the prospects for energy companies is picking up. And in fact, we are seeing improved earnings results among those sectors. But it seems like investors are still a little bit reluctant to get back into that sector.
[05:26]
C
What other effects is the rise of the tech sector having on U.S. markets?
[05:31]
B
I think one interesting effect is that it's actually affecting the overall composition of the S&P 500. So we've been discussing with S and P, Dow Jones Indices, which controls what the S&P 500 looks like in the past, about their future plans for the index. And one of the things that's going to happen later this year is that they're actually going to revamp the S&P 500 telecom sector because as so many tech companies sort of merge into other industries, increasingly there isn't necessarily a thing that's a straightforward tech company or a straightforward telecom company or even a retail company like Amazon, which kind of has its arms and legs in retail and healthcare and all sorts of industries at this point. So the dominance of tech is actually not just about how much of The S&P 500 gains have been contributed by the tech sector, but it's also about what The S&P 500 is like looking like.
[06:29]
C
So, Akani, history shows us that this isn't likely to last forever, the dominance of the tech sector. So what are investors you've been speaking to expecting to happen?
[06:38]
B
I think as much as some people would like there to be more of a shakeup in the leadership in the stock market, the reality is the numbers for these big tech companies, in particular, the ones that are leading the S&P 500 right now, look really good. Amazon, Netflix, and Microsoft all reported very strong earnings at the beginning of this year and by all indications are going to continue to grow in future quarters. So as far as these three companies go, I mean, it looks like the outlook is incredibly bright. But you know, that being said, nothing lasts forever. And we've, you know, as we've seen in the sort of reversal of fortunes for other previously popular investments like Apple and Facebook, it is very possible that unforeseen news events will sort of chip away at some of the gains that we've seen in the, in the leaders of the stock market this year.
[07:29]
C
I've been speaking with Wall Street Journal reporter Akane Ohtani. Thanks so much, Akani.
[07:33]
B
Thanks for having me.
[07:34]
C
And thank you for listening to youo Money Matters. I'm Annemarie Fertoldi in New York for the Wall Street Journal.
[07:40]
A
Deal replaces fragmented Payroll vendors with one global system. No third parties, hire, manage and pay teams in 150 plus countries. Operate like a local everywhere. Visit d e e l.com WSJ.