Market Concentration and Factor Efficacy

The current market is characterized by a high concentration of index funds, leading to questions about the effectiveness of traditional investing factors. Historical comparisons indicate that concentrated markets are not unprecedented, and the varying performance of cheap versus expensive stocks must be examined carefully. Although value investing faced challenges recently, diversified portfolios have still performed well, suggesting that the concept of value is not universally flawed. Factor investing strategies can remain effective, especially when they incorporate a diverse range of stocks and mitigate industry or sector biases.