Investors Avoiding SPY’s Concentrated Holdings Lost Big in 2023

Investors Avoiding SPY’s Concentrated Holdings Lost Big in 2023

The S&P 500 ETF beat its equal-weighted counterpart by 15 points. But can it last?

Reviewed by: Kent Thune
Edited by: Ron Day

As growth-hungry investors piled into Big Tech stocks—the movers behind the S&P 500’s earnings this year—many investors who bet against the highly concentrated index have been left in the dust. 

The top 10 holdings of the $414 billion SPDR S&P 500 ETF Trust (SPY), which tracks the S&P 500 index, made up 28% of the portfolio as of the end of October—that’s higher than SPY’s yearly average for every one of the past two decades, according to Morningstar Direct. 

The overall picture for earnings and returns is similar. State Street Global Advisors predicts the Magnificent Seven stocks, which comprise most of the S&P 500’s 10 largest stocks, will generate more than 100% of the index’s earnings growth in 2023.  
Meaning, if SPDR’s predictions for the rest of the year pan out, the S&P 500 minus the Magnificent Seven—Facebook parent Meta Platforms Inc., Apple Inc., Microsoft Corp., Inc., Alphabet Inc., Tesla Inc. and Nvidia Corp.—would show declining earnings in 2023.  

According to Morningstar Direct, SPY returned 10.6% through the end of October, while the fund’s top 10 holdings contributed 11% to the fund’s returns. If not for those stocks, the entire fund would have been down for the year.

RSP vs. SPY in 2024 

Investors are left trying to avoid this concentration out in the cold. The $39 billion Invesco S&P 500 Equal Weight ETF (RSP), which holds the same stocks as SPY but is weighted equally rather than by market cap, gained 4.8% year-to-date according to Morningstar. SPY rose 20.1% over the same period, causing the largest gap between the two since 2008, according to Bloomberg. 

Though undoubtedly impressive, the Magnificent Seven’s reign may not last forever. State Street analysis predicts the firms will make up just 27% of the S&P 500’s earnings growth in 2024, down from 100+% expected to be generated this year. 

Gabe Alpert is a former data reporter at with over seven years’ experience in financial journalism. He also previously contributed reporting and analysis to Barron’s Magazine, Investopedia and other publications.