Global equity markets advanced in the third quarter but pulled back from 2020 peaks during September. Market moves were dominated—both up and down—by a very small group of giant US stocks. How should investors react?

During the third quarter, global equities rose by 6.7% in local currency terms, with most markets in positive territory (Display, left). But for the year to date, return patterns have been extremely dispersed, with US stocks leading and the tech-heavy NASDAQ index surging by 25% for the year, while European and UK stocks declined (Display, right).

Regional equity market returns are compared, in local currency terms, for the third quarter of 2020 and the year-to-date.

Five of the largest US stocks have dominated US market gains. And in September, as the MSCI World Index retreated by 2.9% from 2020 highs, these same stocks sold off more sharply than the rest of the stocks in the S&P 500. When excluding Facebook, Apple, Amazon, Alphabet (Google’s parent), and Microsoft from the S&P 500, the US market hasn’t moved much at all this year (Display).

A comparison of returns for the five largest US stocks, and for the S&P 500 excluding those stocks, during 2020.