Investing Ideas

Navigating a concentrated equity market in 2026

A small number of high-performing stocks have continued to drive the market’s return. Why that alone is not a reason for trepidation.

By: Denise Chisholm Roy Justice Nidhi Gupta

Updated: 1/16/2026

Key Takeaways

The U.S. equity market has become concentrated, with a handful of stocks driving a 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 has not been a worrisome issue for investors.
Valuations matter, and the forward price-earnings ratios of stocks in the information technology sector are historically high, but significantly lower than 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.

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Navigating a concentrated equity market in 2026

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