The S&P 500's gains this year are thanks to just 8 stocks, signaling the banking turmoil isn't over yet, Jim Bianco says

Jim Bianco. Reuters

• The S&P 500's gain this year is thanks to only eight mega-cap stocks, Jim Bianco said.
• The Bianco Research boss noted Big Tech companies like Apple and Alphabet have led the index higher.
• Bianco warned banking turmoil might not be over given the broad weakness in the S&P 500.

The S&P 500's year-to-date gains have been driven by just eight stocks, while the other 492 stocks in the benchmark index have fallen as a group in 2023, signaling the banking turmoil isn't over yet, Jim Bianco said.

"Narrative building that the banking crisis is now over because the S&P 500 has just about retraced all its losses," the Bianco Research president said in a Thursday tweet. "Someone tell the bank stocks as they are unable to rally ... and someone tell the other 492 stocks in the S&P 500 as they are collectively down on the year. Eight stocks are keeping the YTD gains in the S&P 500 positive."

The S&P 500 has been on a choppy ride this year, rising about 5.9% since the start of January to its highest level in about three weeks. The index has gained ground despite the recent banking-sector chaos, which was triggered by the collapse of Silicon Valley Bank and initially rattled stocks.

However, Bianco suggested the index's gains aren't cause for celebration as only eight stocks are behind its progress. These include FAANG stocks – an acronym for five mega-cap US tech companies: Facebook, Amazon, Apple, Netflix, and Google. 

The other companies fueling the S&P 500's gain are Microsoft, Nvidia and Tesla, according to Bianco. Chipmaker Nvidia is the best performer of 2023 in the S&P 500 index with an 87% gain, thanks to its exposure to the fast-growing artificial intelligence industry.

The collapse of Silicon Valley Bank earlier this month has fueled hopes among investors that the Federal Reserve will have to pause or reverse its interest-rate hikes to maintain financial stability and shore up the economy. An end to the increases could be positive for stocks, as it could fuel demand and stop borrowing costs rising any further.

Bank stocks are often viewed as havens in times of uncertainty, given their strong balance sheets and reasonable valuations. However, they have come under intense pressure amid chaos in the banking sector.

Shares in PacWest Bancorp and Western Alliance are down 59% and 40% this year, respectively, as investors grow worried about the health of smaller lenders.