Market Concentration in Perspective

  • The hot topic in equity markets for several months has been concentration at the top in a few mega-cap tech companies that are driving returns.
  • Global Financial Data (see chart and link in the sources) recently published an interesting history of market concentration in the U.S.
  • As a note, a couple large national banks accounted for most of the nation’s market cap early in its history.
  • Markets have obviously evolved significantly since the late 1700’s, but it’s worth seeing the data on a longer timescale to note the ebbs and flows over the past 100 years or so after the total number of public companies increased to a more modern level.
  • In conclusion the author notes that increased concentration is not a sign of impending doom. Moreso, bull markets tend to increase market concentration for an undetermined amount of time while bear markets decrease concentration until the next bull run.

Sources:

Global Financial Data, 200 Years of Market Concentration – Global Financial Data

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