Morgan Stanley IM: Stock Market Concentration: How Much Is Too Much?
Stock market concentration has risen sharply over the past decade, creating a tough environment for active managers. In this report, we look at concentration over the past 75 years to see where we stand.05.06.2024 | 06:22 Uhr
We review which companies have been the largest and how that has changed. We ask if there is a correct level of concentration by studying other global markets and by presenting the possibility it was too low before. We then examine whether corporate performance supports the current increase.
- Stock market concentration has increased sharply over the past decade, creating a challenging environment for active managers and also raising unease about the loss of diversification, the valuations of the largest stocks, and the effect of flows into index funds.
- In this report, we look at concentration over the past 75 years to see where we stand today and to reflect on what it means for active equity managers.
- We examine which companies have had the largest stock market capitalizations and how that population has changed.
- We ask whether there is a correct level of concentration, both by comparing the U.S. to other global markets and by presenting the possibility that concentration was too low in the past.
- We then seek to determine whether fundamental corporate performance supports the current increase in concentration.