Peak Concentration?

Markets have been highly concentrated over the past few years. This concentration reached new peaks in June with just 5 companies (Microsoft, NVIDIA, Apple, Alphabet, & Amazon) accounting for nearly 30% of the S&P 500 Index.

While it has been a long time since we have seen concentration in markets this extreme, we have plenty of examples of how this story ends. During a similar period of concentration in the late 1990s, the 5 biggest US companies made up nearly 20% of the S&P 500. After reaching peak concentration in 1999, these 5 stocks (Microsoft, GE, Cisco, Walmart, & Exxon) didn’t disappear, but other companies began to catch up and emerge, lowering their overall share of the market (and market returns).

Over the past month, we have begun to see the first signs of balance returning to markets (and market returns). For the first time in a long time, Large-Growth stocks have been flat or down, while Small and Value stocks are shooting up. Whether this shift happens quickly or continues to play out over several years, a diversified, value-oriented portfolio is well positioned to succeed. 

Peak Rates?

While the stock market certainly looks like it’s entering a new phase, it is looking increasingly likely the bond market will be entering new territory as well. With interest rates higher than at any time since 2000, the Federal Reserve Board is widely expected to reduce rates for the first time since early 2020. As Lee mentioned, this is a change we have been diligently preparing for over the past 2 years – ensuring that our clients are well positioned to benefit from these potential rate cuts while also benefiting from higher levels of interest income now and over the next several years.

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This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. (C) Twenty Over Ten