Concentrated risk

The U.S. stock market is very concentrated.

There were a few months where the top internet stocks underperformed, but that ended in January.

Alphabet’s (GOOG) (NASDAQ:GOOGL) massive gain after reporting earnings punctuated the move. Alphabet stock is up about 40% in the past 6 months.

The recent gains in these stocks have led to a very small percentage of the S&P 500 (spy) beating the index in the past 12 months. Previous high concentration points were signals of the end of regimes.

The two highlighted points in the chart are when the Nifty 50 and the Dot Com bubbles ended.

AS you can see the top 5 companies haven’t been such a large percentage of the S&P 500 since at least 1980. Furthermore, these stocks might face multiple contraction due to rising rates and inflation.