The S&P 500 has reached an unprecedented level of concentration, with the top 10 stocks driving 54% of its market cap gains since January 2021, according to the Kobeissi Letter.
What Happened: This means that out of a 70% total gain, would have come from just the top 10 companies, including giants like Apple Inc. AAPL, Microsoft Corp. MSFT, and Nvidia Corp. NVDA.
These 10 firms now account for a near-record 39% of the S&P 500’s total market value, a level last seen during the 2000 tech bubble, raising concerns about market stability.
The Kobeissi Letter highlights that this concentration has turbocharged returns but left the remaining 490 stocks contributing less than half the index’s growth.
If you invested $100,000 on Jan. 1, 2021, your portfolio would have grown to $170,000, with $37,800 of that gain tied to these mega-caps.
The trend, fueled by passive investing and AI sector dominance, mirrors historical patterns like the dot-com era, where concentrated gains preceded a crash.
The Kobeissi Letter warns that such narrow rallies mask broader market fragility, with global investors increasingly shifting funds to emerging markets amid U.S. tech inflation.
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Why It Matters: On the technical front, the S&P 500 index tracked by the SPDR S&P 500 ETF Trust SPY made a golden cross, where the 50-day moving average surpasses the 200-day moving average, on June 30.
Golden crosses often form during a steady uptrend and cause an additional upswing in the price once the market identifies the signal.
Following the golden cross, the S&P 500 made several new records. On Monday, the index made its sixth consecutive day of record close.
While all technical indicators point toward a bullish trend, the relative strength index of SPY at 76.34 remains in the overbought zone, signaling that it may be poised for a consolidation or reversal in the near term.
Price Action: The SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, were trading higher in premarket on Tuesday. The SPY was up 0.28% at $638.75, while the QQQ advanced 0.50% to $570.97, according to Benzinga Pro data.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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