The service and experience to help you take your business further
Navigating a concentrated U.S. stock market
On its own, recent concentration might not be a reason for investor fears.
Key takeaways
• The U.S. equity market has become concentrated, with a handful of stocks driving larger percentage of the market’s gain than at any time since the 1970s.
• Although the last two periods of high market concentration ended in a recession and a burst valuation bubble, high concentration alone might not be a worrisome issue for investors.
• Valuations matter, and the forward price-earnings ratios of stocks in the information technology sector are about half of what they were before the technology stock bubble burst in the early 2000s.
• Higher market concentration may also be an opportunity for active stock selection due to a higher variance of earnings surprises.