S&P Market Concentration Hits An 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 the market has become the most concentrated in the past 150 years. As of May 31, the Top 10 Stocks had a market cap of $15.09 trillion which represented 34.07% of the S&P 500. The previous record level of concentration was 32.87% which occurred in 1963. The Top 10 stocks have never represented more than one-third of the total market cap, much less 34%. The Top 5 stocks (Microsoft, Apple, Nvidia, Google and Amazon) had a total market cap of $12.07 trillion which represented 26.24% of the S&P 500. The Top 5 represented less than 10% of the S&P 500 in 2014 and until now, it had never been more than 25% in the past 150 years.
The increase in the concentration was driven by Nvidia, which rose in price by 26.89% in May after releasing a quarterly report that exceeded expectations. In addition to Nvidia, Apple rose 12.87%, Meta rose 8.52% and Microsoft rose 6.63%. Eight of the Top 10 stocks rose by more than the 4.8% that the S&P 500 rose by in May. The 4% rise in the price of Nvidia on June 3, 2024 made it the second largest company in the world. Another 10% rise in the price of Nvidia will make it the largest company in the world worth over $3 trillion. Given the obsession with Nvidia and AI in the market today, this result seems highly possible and could happen sometime this month. Remarkably, Nvidia was under $1 trillion in market cap in May of 2023 and just reached $2 trillion in February of 2024. Of course, at some point, Nvidia will decline in price, but when it will stop, nobody knows.
Figure 1. Top 10 Companies as a Percentage of the S&P 500, 1875 to 2024
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 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.
