COMmentary

As businesses and employees adjust to the post-Covid work world, one thing is clear: working from home is here to stay. Now that the dust has settled, longer-term remote work trends are beginning to emerge. In fact, remote work has been described as “a classic example of an infant industry” that was given a temporary tailwind (Covid-19), but “remains competitive even after the support is removed.”1 The fact that remote work technology has become a sub-industry within itself incentivizes these companies to continue to support remote work and increases competition in the field.

While mega-caps drove much of the current rally, small-cap techs have potential to gain from the easing macroeconomic conditions that could start lifting stocks in the coming months. Cooling interest rates could help small-cap tech companies that are still very much in the growth phase and dependent on cheap borrowing to finance that growth.

The largest constituents in the S&P 500® Index tend to represent a significant portion of its total return profile, while the largest constituents in the NASDAQ-100® Index deliver an even higher percentage of the index’s total return given its smaller basket. Usually, this concentration is a good thing, as big names such as Microsoft, Apple, and Amazon deliver strong returns, but in 2022, not so much. In fact, both Microsoft and Apple were down nearly 30% in 2022, but remained the top two holdings in both the NASDAQ-100® Index and S&P 500® Index, with over 10% and over 5% weight, respectively.