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Concentration

There are three levels of concentration in the global stock market: (1) the U.S. accounts for 61% of the assets invested globally in equities. Over the last 20 years, investing outside the U.S. has been a bad asset allocation decision. (2)the The tech & comm sector accounts for 40% of the index. With the mass popularity of index strategies, most funds are following the index and therefore have exactly that level of concentration in the tech sector. (3) at stock level, as you can see below, the top 10 companies (in the U.S., and in the tech sector for the most part) account now for 35% of the weight in the index, and for about 50% of the returns of the index YTD. And (4) concentration in NVDA, which accounts for 33% of the S&P500 return YTD. This phenomenon may continue for a while, but it’s not healthy, and it’s not sustainable.


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