

Why the Stock Market Might Be at Peak Concentration Risk
78 snips Jan 24, 2025
Kevin Muir, a former equity derivative trader and the Macro Tourist blog creator, discusses the alarming concentration risk in US equities, where just 10 stocks dominate the S&P 500. He draws parallels to the dotcom bubble and questions whether current enthusiasm for AI is justified. Muir also highlights the regulatory challenges index providers face and the potential vulnerabilities in a market heavily reliant on tech giants. As he shares insights, he explores what this means for investors and whether shifts in focus can balance market dynamics.
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Nortel Dominance in Canada
- Nortel once comprised 35% of the Canadian stock market index.
- Bell Canada's significant Nortel holdings exacerbated this concentration.
Concentration Risk Comparison
- US stock market concentration is comparable to pre-1929, 1970s, and dot-com bubble levels.
- These periods historically had poor subsequent returns.
Index Providers and Competition
- Index providers' fees are rising, creating opportunities for new competitors like Bloomberg and Morningstar.
- Some indices are easier to beat than others, influencing investor and fund manager choices.