That’s the title of an article that I wrote back in 2020 (https://www.cognizantwealth.com/2020/07/22/is-the-stock-market-overly-concentrated-today/) when the market capitalization of the top ten stocks in the overall U.S. stock market topped 20% (30% of the S&P 500 index). Today the contribution of the top ten stocks has climbed to 32% of the S&P 500’s market cap. The number one U.S. stock alone is currently worth about the same as the entire stock market of China, as Steve Goldstein pointed out in a recent MarketWatch article. Have we reached some excessive risk point in the U.S. stock market?

I observed in the previous article that it’s been common historically for a few stocks to dominate the various U.S. stock indices. But how does that compare to other country’s stock markets? You might be surprised to learn that the concentration at the top is even more pronounced elsewhere.

Morningstar reports the percentage of assets in the top 10 holdings of ETFs. Here’s the list of the concentrations of the top ten stocks in each of the seven biggest developed nations today, as represented by large cap ETFs (in parentheses) that act as proxies for each of those countries:

As you can see, only Japan has a lower top-ten concentration that the U.S., and not by much. Every other developed country’s stock market is even more concentrated at the top than ours is. Logically this makes sense since they have fewer companies in their indices. With the exception of Japan, each of the other counties’ ETFs are comprised of less than 100 stocks. In addition, all these indices are capitalization-weighted. That means more weight is given to the more popular stocks, further increasing representation at the top of the pile.

Lest you think that the best investment strategy is to buy only in the top ten stocks, keep in mind that in 2022 half of them plunged way more than the overall S&P 500 did. And as I shared in the previous article, it’s uncommon for the top stocks to continue to outperform year after year. Just over the last four years 40% of the previous leaders have changed (Nvidia, Eli Lilly, Broadcom, and Tesla have replaced JP Morgan, Visa, Johnson & Johnson, and Visa).

The bottom line: whether you look at historical U.S. data or current international data, almost all equity indices will appear to be highly concentrated. And it turns out that the U.S. actually has one of the least concentrated stock markets on the planet.