#market-concentration

#market-concentration

The last thing a diversified fund manager wants is to run a portfolio dominated by just seven technology companies - all American, all megacap, clustered in the same corner of the economy. Yet as the S&P 500 pushed to fresh records this week, investors were again forced to confront a painful reality: Keeping pace with the market has largely meant owning little else.

Market concentration has reached levels not seen in decades. The three largest U.S. stocks now represent over 20% of the S&P 500's total value, and the top 20 account for roughly half. iShares Top 20 U.S. Stocks ETF ( NYSEARCA:TOPT) offers a direct bet that this 'winners keep winning' trend will continue. The Portfolio Role: Concentrated Megacap Exposure TOPT tracks the S&P 500 Top 20 Select Index, holding the 20 largest U.S. companies by market cap. The index rebalances quarterly, automatically rotating holdings to reflect which companies remain in the top tier. This creates a momentum-adjacent strategy where recent winners that grow into the top 20 get added, while those that fall out get removed.

"So the way I like to think about it is: Is there going to be an AI wobble at some point? Are investors going to be concerned about how those CapEx dollars are being invested? Right now, he continued, alluding to a famous game theory scenario, "there's a little bit of a prisoner's dilemma, let's call it, among the larger firms. You have to invest in it because your peers are investing in it, and so if you're left behind you're not going to have the stronger competitive position to it."

The last 24 hours have brought a clear risk-off move, as concerns over lofty tech valuations have hit investor sentiment. Markets compounded these losses in the early hours of Asian trading but have been rallying back in the couple of hours prior to going to print with US futures clawing back towards flat with the Kospi rallying back a couple of percentage points from early -5% plus losses.