S&P Market Concentration Hits a New All-Time High
Bryan Taylor, Chief Economist, Global Financial Data
Standard and Poor’s has just released data on the market cap and share of the S&P 500 that the Top 10 stocks make up. The data show that once again the US stock market has become the most concentrated in the past 150 years. As of June 30, 2024, the Top 10 Stocks had a market cap of $17.07 trillion which represented 35.77% of the S&P 500. One month ago, the Top 10 represented 34.07% of the S&P 500. Until the past two months, the Top 10 stocks never represented more than one-third of the total market cap, much less 35%. The Top 5 stocks (Microsoft, Apple, Nvidia, Google and Amazon) had a total market cap of $13.13 trillion which represented 27.46% of the S&P 500. The Top 5 represented less than 10% of the S&P 500 in 2014 and until February 2024, it had never been more than 25% of the Top 500 stocks in the past 150 years.
The increase in the concentration was driven by Nvidia, which rose in price by 12.69% in June. In addition to Nvidia, Apple rose 9.56%, Amazon rose 9.53% Meta rose 8.01% and Microsoft rose 7.67% while the S&P 500 rose by 3.49%. Berkshire Hathaway was the only one of the Top 10 to drop in price last month. Microsoft, Nvidia and Apple all have market caps of over $3 trillion making each of them larger than the entire S&P 400 Midcap. At one point in June, Nvidia was the largest corporation by market capitalization in the world, but the recent decline in the price of Nvidia allowed Microsoft to take back the top spot. Remarkably, Nvidia was under $1 trillion in market cap in May of 2023 and just reached $2 trillion in February of 2024.
Figure 1. Top 10 Companies as a Percentage of the S&P 500, 1875 to 2024
Can each of the top three stocks remain larger than the Midcap 400? Is the increased concentration a warning that the market is hitting a major top? An analysis of the past says no. The percentage of the Top 10 relative to the top 500 hit 32% in both 1955 and in 1963, and the market continued to rally until 1973. What is more likely is that the bull market will now spread to the rest of the market. That is what happened in the 1960s, and we hope that will happen in the 2020s.
