View on Market Concentration

This year has been a volatile ride for equity markets.  Currently, we hear a lot of people talk about how U.S equity markets are at all time highs.  While this is true for various indexes, we also want to point out an important variable that is happening under the surface. 

Many “market indexes” are becoming heavily concentrated in a handful of stocks, as depicted in the chart below.  These big tech names have led the markets higher but it is important to remember that past performance is not indictive of future results and many people might have portfolios that are very concentrated in just a few names now.

Many of these large companies have good products and long-term prospects, but becoming overly concentrated in your portfolio adds an extra amount of risk.  We monitor our portfolios for this and ensure that no one company will determine the ultimate success of our clients’ portfolios.  Ultimately, tomorrow’s market leaders could be a completely different sector of the market or even a market outside the U.S. which makes diversification the foundation for success.    

Source: Charles Schwab, Bloomberg, Macrobond as of 6/30/2025. Top 5 stocks in the S&P 500 Index are NVIDIA, Microsoft, Apple, Amazon, and Meta.