NCPA - National Center for Policy Analysis

1998 Was No Party For Smaller Stocks

February 15, 1999

Large capitalization stocks soared last year and market averages reached new heights. The Standard & Poor's 500 Index shot up 26.7 percent and the NASDAQ Composite zoomed ahead 39.6 percent.

But the market boom was much more narrowly based than many people realize, according to Salomon Smith Barney strategists Jeffrey M. Warantz and John L. Manley Jr.

  • On average, stocks of companies with a capitalization of more than $20 billion at the start of the year climbed 25.9 percent, and those in the $5 billion to $20 billion category added only 6.2 percent.
  • Companies in the $2 billion to $5 billion category actually declined in price.
  • Those with capitalizations below $250 million slid more than 24 percent on average.
  • In fact, two-thirds of all U.S. stocks lost value last year.

Just 33 stocks in the S & P 500 accounted for over 75 percent of the surge in that index.

Source: Gene Koretz, "The Downside of the '98 Boom," Business Week, February 15, 1999.


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