Today’s post is short and sweet. We all have lots to do after the long weekend.
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Now let’s talk market concentration.
In the chart below, I’m showing you the S&P 500’s rolling five year returns since 1981 broken down by the contribution of:
The top 100 stocks (light blue shade) vs
The bottom 400 stocks (dark blue shade)
The chart shows that just over ¾ of the S&P 500’s return since September, 2020, is coming from the top 100 stocks.
So yes, the S&P 500 is concentrated.
But concentration has always played a role in driving market returns.
Take another look at the chart.
Notice how the light blue line is always a significant portion of the overall return? Just eyeball it.
We could go deep into the stats of where we are today vs history, but I don’t want to get too far in the weeds. I think it would detract from my point that concentration really isn’t an anomaly.
It’s actually a significant part of the engine that has been driving markets for over 40 years.
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