Beyond The Break
Concentration Beneath the Surface
The S&P 500 is often viewed as a broad and diversified index, but its performance is increasingly driven by a small group of very large companies. Because the index is weighted by market capitalisation, larger businesses have a disproportionate influence on returns. Today, the “Magnificent Seven” (a group of leading U.S. technology and platform companies) account for nearly 35% of the index, with a combined market value exceeding $22 trillion.
This level of concentration means that even passive investors may have significant exposure to just a handful of companies, while active managers are often compelled to hold them to remain competitive. Although these businesses are high-quality and have delivered strong growth, such concentration would historically have been considered aggressive.
For investors, the key consideration is not whether these companies are attractive, but whether the level of exposure aligns with their overall objectives and risk tolerance.
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