Here's what's necessary to return the incredibly concentrated U.S. stock market to normal levels
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The U.S. stock market is currently imbalanced, with the top ten companies in the S&P 500 making up 40.7% of the index, significantly above the pre-2020 average of 20.8%. D.E. Shaw estimates that for this concentration to normalize, the rest of the index would need to increase by over 160%. The equal-weight S&P 500 has risen 6% this year, while the weighted version has gained 2%. This concentration affects risk management, suggesting fund managers may need dual benchmarks for top stocks and the rest.
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