Morningstar just put up this stock concentration article. The market has become very concentrated similar to the 1920’s & 1960’s. Morningstar seems to indicate it is not important. What do you think?
There is a nice chart/graph-top of the 10 stocks-market weight at the link.
https://www.morningstar.com/stocks/stock-market-concentration-has-surpassed-its-1930s-peak-should-investors-worry
Any mention of the 1930s in an investment context raises alarm bells. That’s especially true for me because I’ve just finished Andrew Ross Sorkin’s excellent book 1929 about the stock market crash that triggered the Great Depression. Parallels between the “Roaring ’20s” of the last century and today jump off the page.
The top 10 stocks in 1932 were a mix of different industries. Today the top 10 stocks have 8 technology stocks that make up the much market weight.
The 1920s, like the 2020s, was a time of technological transformation. The largest companies of 1932 reflect an era in which automobiles, radio, and telecommunications were going mass market. Electrification was spreading. Then, as now, wealth inequality was high, and businessmen were celebrities.
“But the greatest product,” writes Sorkin about the 1920s, “the one that made all the others possible, was credit. Buy now, pay later. It was a kind of magic.” Not only were Americans buying cars and radios on credit, but also stocks. As for the “Roaring” 2020s, credit card debt has reached record levels. Balances in margin accounts exceeded $1.2 trillion in December 2025, up 36% from December 2024, according to the Financial Industry Regulatory Authority.
I’ve pointed out some broad similarities between the 1920s and 2020s, but there are many differences, of course. Market dynamics have changed, and regulation has come a long way. Institutions like the Federal Reserve are far more sophisticated.
Nor is market concentration a good predictor of market stress. Top-heavy markets have produced some phenomenal returns historically. Just look at the past few years. The Morningstar 2026 Global Investment Outlook notes that although the top 10 US stocks’ weight surpassed their internet bubble levels by late 2020, “an investor who stepped aside then would have missed several years of exceptional gains, notwithstanding a brief setback during the inflation-driven selloff of 2022.” The implication is that market-timing is to be avoided.
“Concentration is neither bad nor good, per se,” writes Morningstar’s Manager Research team in a recently published study, Bold Portfolios: Are They Worth Their Risks? Concentration can be great for returns when market leaders are rallying. Believers in efficient markets see concentration as a justified outcome of fundamental strength.
But there’s a flip side. “Even if concentration doesn’t guarantee a downturn, it erodes diversification benefits and makes markets more vulnerable to sentiment reversals,” according to the Morningstar Outlook. My Manager Research colleagues point out that weight in the top 10 is only one dimension of concentration. The share of industries and economic sectors within the market must also be considered.
On that front, sector concentration levels in today’s US stock market have risen, too. The technology sector dominates to an even greater extent than in the late 1990s.
I admit I have been concerned with the concentration of tech stocks though I have benefited from the rise of tech stocks over the past couple of decades.
So Monday I sold my Vanguard tech ETF [VGT] & Vanguard Russell 1000 Index Fund ETF [VONE]. And put that money into the Vanguard FTSE Developed Markets Index Fund ETF Shares [VEA] &
Vanguard Value Index Fund ETF Shares [VTV].
I expect my returns will suffer but I will sleep better at night due to less volatility. Those funds do have some tech exposure but not any “Magnificent Seven” stocks. My Vanguard Dividend Appreciation Index Fund ETF [VIG] does have 8% invested in APPL & MSFT. I’ll just have to live that.
