IWF - Can Equal Weight Solve Our Concentration Crisis? Not So Fast...

2024-07-16 09:35:00 ET

Summary

• The US stock market has never before been this top-heavy, and no easy solution, or indeed any solution, appears to be within the grasp of investors.
• Mega-cap concentration has exploded, increasing by 115% from a 25-year low in 2015, when the top 10 holdings accounted for 15.52% of total index weight.
• In periods of hyper-concentration, equal weighting radically departs from market fundamentals, and indeed a return to these fundamental characteristics can foster the more balanced portfolio investors desire.

The US stock market has never before been this top-heavy, and no easy solution, or indeed any solution, appears to be within the grasp of investors. The peak of the dot.com bubble seems quaint by comparison to the present market structure, with the top 10 weight currently standing at a resounding 33.35% of market capitalization. The diversification dilemma is real....

For further details see: