Here’s a big one that gets brought up a lot: “The U.S. is too concentrated and the indexes are being driven by too few stocks.”
In case you hadn’t heard, the top 10 stocks in America make up 38% of the total value of the S&P 500.
Does that sound like a lot to you?
Because I am told constantly that this trend is unsustainable.
But, as we so often see, everybody’s wrong.
Concentration Globally
I’m proud to be an American. But, when it comes to investing, we want to think like Earthlings.
Across the globe, a 38% concentration is actually just a drop in the bucket.
This chart comes from my friend Ryan Detrick, Chief Market Strategist at Carson Group.
We’re looking at the percentage of the total market that the top 10 stocks represent per country.
You think 38% is too much?
“Hold my beer,” says the rest of the world.
Look at that list.
When you put things in perspective, you come away with a completely different thought.
The U.S. actually isn’t very concentrated at all, not when you compare it to all the other most important countries around the world.
Perspective
In a vacuum, certain numbers and values may seem like a lot.
But, when you look at things through the lens of an Earthling and not just American eyes, the picture looks much different.
Ten stocks represent more than a third of the S&P 500?
Great. It’ll likely be more when we address this again in a few quarters.
And, if not, that’s OK too.
Because it actually doesn’t even matter.
Best to focus our energy elsewhere.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs