Last week, DB's head of thematic research, Jim Reid, published the latest must read version of his "Charts that make you go WOW" (available to pro subs) which repeated a chart the Deutsche strategist has used before, namely on e tracking the earnings of the largest ten companies in the S&P 500 around the market peak in 2000 through to today. Obviously, the current period shares some similarities in valuations to 2000. In that chart, Reid showed how four of the top ten remarkably saw lower earnings in FY 2024 than in FY 2000.
Of course, not all stories are the same: some companies have thrived. Microsoft stands out, with earnings increasing tenfold over the period. And to be clear, this isn’t an anti-earnings narrative: S&P 500 earnings overall have outpaced their long-term average over this period. The point is how unevenly those gains have been distributed.
In today’s Chart of the Day, (page 58 of the WOW! pack), Reid follows up by showing the total equity return of those same top ten companies from 2000 to the present. Microsoft again leads the pack (+10.9% per year.), but only two of the ten have outperformed the S&P 500 over this 25+ year stretch. Remarkably, two have delivered negative returns, and the bottom five in the legend have all returned less than +2.8% p.a., well below the +7.8% p.a. for the S&P 500 over the period.
