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The stock market has simply never been this concentrated. In fact, the 10 most valuable US companies had a market capitalization of nearly $24.4 trillion as of October 23, according to CompaniesMarketCap.com. The heavy concentration is in large-cap growth tech stocks.To put this in perspective, these 10 companies represent just over 43% of the S&P 500. Nvidia alone represents nearly 8% of the S&P 500. That’s roughly the same value as the entire 2,000 small-cap companies in the Russell 2000 index. As of June 30, 2024, the top 10 companies accounted for 34.8% of the S&P 500; so, in just over 15 months, concentration increased by 8.2 percentage points. To put it another way, large-cap growth has trounced small-cap value over the past decade. Small-cap value was the rage back then, often touted as greater return with less risk.SUBSCRIBE:  Receive more of our free Advisor Upside newsletter. READ ALSO: Is Active Management Primed for a Comeback? and Morgan Stanley Buys Equity Trading Platform in Private Investment PushOne response is that the market is overvalued, and it’s time to get out. Taylor noted: “Based upon our analysis of the past 150 years, there seems no reason to believe that the increased concentration of the past 10 years is the harbinger of a major bear market. Increased concentration is the sign of a bull market, and bear markets reduce concentration.” Of course, that strategy would have backfired over the past couple of years. According to Goldman Sachs, “while investors usually think of elevated concentration as a sign of downside risk, the S&P 500 rallied more often than it declined during the 12 months following past episodes of peak concentration.”Another often-used strategy to avoid exiting the market is to buy an equal weight S&P 500 index fund. This would have these 10 most valuable companies represent only 2% of the fund, rather than 43% for the cap-weighted S&P 500. That strategy failed miserably in the past few years with some equal weight funds underperforming. Taylor agreed that this strategy is trying to outsmart the market by underweighting the largest of the companies and overweighting the rest.Finally, don’t overweight these companies. Now that large-cap growth companies are doing so well, there are more and more portfolios with large-cap growth funds, or owning the likes of Nvidia and Microsoft directly. Many are now avoiding small-cap altogether, claiming that the best small-cap companies can grow to become large-cap, while staying private and avoiding the costs, and extra regulation, of being a public company. Open AI is one example. The argument is that this only leaves the bad companies in the public markets. (While I’ve never been in favor of tilting to any factor, such as small-cap, I’ve never believed in excluding them either.)Terms and Privacy PolicyPrivacy & Cookie SettingsMore InfoS&P 5006,851.97 +11.77 (+0.17%)Dow 3047,336.68 -226.19 (-0.48%)Nasdaq23,834.72 +109.77 (+0.46%)Russell 20002,471.24 -8.14 (-0.33%)VIX17.17 -0.27 (-1.55%)Gold4,013.80 +17.30 (+0.43%)PortfolioSign in to access your portfolioSign inTop gainersCIFR Cipher Mining Inc. 22.76 +4.11 (+22.04%)AMKR Amkor Technology, Inc. 37.84 +5.56 (+17.22%)LUMN Lumen Technologies, Inc. 11.83 +1.55 (+15.08%)IDXX IDEXX Laboratories, Inc. 722.94 +93.43 (+14.84%)FRPT Freshpet, Inc. 56.25 +7.04 (+14.31%)Top losersQURE uniQure N.V. 34.29 -33.40 (-49.34%)RGC Regencell Bioscience Holdings Limited 13.56 -3.09 (-18.56%)KMB Kimberly-Clark Corporation 102.27 -17.44 (-14.57%)UUUU Energy Fuels Inc. 17.80 -2.71 (-13.21%)QS QuantumScape Corporation 16.21 -2.23 (-12.09%)Most activeKVUE Kenvue Inc. 16.14 +1.77 (+12.32%)NVDA NVIDIA Corporation 206.88 +4.39 (+2.17%)CIFR Cipher Mining Inc. 22.76 +4.11 (+22.04%)PFE Pfizer Inc. 24.66 +0.01 (+0.04%)ONDS Ondas Holdings Inc. 6.15 -0.29 (-4.50%)Earnings eventsMy earnings eventsEarnings eventsTrending tickersBTC-USD Bitcoin USD 106,584.21 -3,434.80 (-3.12%)PLTR Palantir Technologies Inc. 207.18 +6.71 (+3.35%)IREN IREN Limited 67.75 +7.00 (+11.52%)KMB Kimberly-Clark Corporation 102.27 -17.44 (-14.57%)KVUE Kenvue Inc. 16.14 +1.77 (+12.32%)Top economic events