Investing Ideas

Navigating a concentrated U.S. stock market

On its own, recent concentration might not be a reason for investor fears.

By: Denise Chisholm Roy Justice Nidhi Gupta

Updated: 7/2/2024

Key Insights

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 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.

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Navigating a concentrated U.S. stock market

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