20 Jun 2025
The top ten companies in the S&P 500 – largely technology names – comprise a third of the index’s market capitalization – near the highest in history. While these stocks have driven a period of strong outperformance relative to other regional equity indices, some investors worry that this concentration can lead to lower returns if these stocks’ profitability were to slow
However, when comparing the weight of the top 10 U.S. stocks to equity concentrations abroad, concentration becomes less worrisome. The top 10 stocks of Germany, Brazil, France, South Korea and China, respectively, constitute 50% or more of each country’s equity index. The concentration of the top 10 stocks in the S&P 500 of 34.4% appears less of a concern in comparison. In addition, the concentration in other regions like Japan and Emerging Markets is only marginally lower at 27-28%.
Like most metrics used to assess the qualities and appeal of an individual stock, index metrics such as concentration are most meaningful when considered relative to their peers. In our view, the lower concentration of S&P 500 stocks makes U.S. equities attractive relative to their foreign counterparts, supporting our preference for U.S. large cap stocks.