On Friday, we published our annual recap report for 2024. The report provides a complete rundown of everything that went on across financial markets this year, including the trend of incredible concentration in stocks up at the top.  Replicated below is a chart from that report showing the combined market cap of the S&P 500’s eight largest stocks as a percentage of total S&P 500 market cap for each year going back to 1994.

Currently, the eight largest members of the S&P—at the moment those are the Magnificent Seven names plus the newest trillion-dollar stock: Broadcom (AVGO)—account for 35.6% of S&P 500’s total market cap. That’s a record high. We would also note that the growing share of the S&P 500’s market cap that this small handful of stocks accounts for isn’t exactly a new phenomenon.  Over the past decade, the largest stocks’ share of market cap has steadily been growing, and actually, this isn’t the only record high to highlight with prior records being set at 29% at the end of 2021 and 30% last year. With that said, the 5.6 percentage point jump versus last year is one of the largest one-year increases in concentration at the top that we’ve seen.

Drilling down a step deeper, below we again show the collective share of S&P 500 market cap possessed by the eight largest members for each year since 1994, but this time with a breakdown by sector.  Of the current group of largest stocks, half belong to the Tech sector: NVIDIA (NVDA), Apple (AAPL), Microsoft (MSFT), and Broadcom (AVGO).  Of course, zooming out for context, the Tech sector, as a whole, holds a historically massive S&P 500 weighting at 32%, but these four stocks alone account for a huge share (21.5  percentage points) of that.  In other words, the S&P 500 is heavily concentrated in Tech, and Tech is heavily concentrated in these four stocks.

As for the other largest members, Communication Services names—Meta Platforms (META) and Alphabet (GOOGL)—account for a combined 7.21% of the S&P 500’s total market cap and the remaining two names from the Consumer Discretionary sector—Tesla (TSLA) and Amazon (AMZN)—are to thank for 6.95%.

As for the rest of the sectors, 2024 is going to end with Financials not having a single stock in the eight largest S&P members for the first time since 2009. This is thanks to Broadcom (AVGO) unseating Berkshire Hathaway (BRK.B) as the index’s eighth largest stock. Meanwhile, Industrials hasn’t had a stock land in the top eight since 2015, and Consumer Staples has now gone a decade without a top eight stock. In the past five years, Health Care has only found its way into this group once in 2022, but otherwise, it has been absent.  Materials, Real Estate, and Utilities haven’t had a member land in the top eight largest stocks in any year since at least 1993.

Again, the present situation is historic. Aside from there never having been such a large share of the S&P 500’s market cap coming from the top, there also hasn’t been a year since at least 1993 when these top eight stocks have had such narrow sector representation.  As shown below, only three sectors are represented among the S&P 500’s top eight stocks. Historically, it has been most common to see six different sectors represented among these eight names.

Welcome to Bespoke Brunch Reads — a linkfest of some of our favorite articles over the past week. The links are mostly market-related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.

Wounded Knee: On December 29th, 1890, one of the darkest chapters in US history unfolded at Wounded Knee Creek in South Dakota. What began as an effort by US troops to disarm a band of Lakota Sioux quickly escalated, leaving approximately 300 dead.

The Lakota, part of the Sioux Nation, had been participating in the Ghost Dance movement, a spiritual practice that sought to restore their lands and way of life. US authorities, who feared it might inspire rebellion, saw this movement as threatening. Tensions came to a head when US troops, led by the Seventh Cavalry, intercepted Chief Spotted Elk (Big Foot) and his band as they traveled to the Pine Ridge Reservation. The group was ordered to set up camp at Wounded Knee, where soldiers surrounded them. The next morning, as soldiers began disarming the Lakota, a gunshot, its source still debated, triggered chaos. Armed with Hotchkiss guns, the troops opened fire on the encampment.

Though some soldiers were awarded Medals of Honor for their actions, for the Lakota and other Native communities, it remains a searing reminder of the suffering endured during westward expansion.

Health & Wellness

The effects of ‘brain rot’: How junk content is damaging our minds (El País)
“Brain rot” being named Oxford’s Word of the Year says a lot about how people feel about endless scrolling and junk online content. Research shows that doomscrolling can mess with your brain, shrinking grey matter, shortening attention spans, and making it harder to focus. Experts say the key isn’t just cutting back on screen time but being intentional about what you’re watching and making room for real-world activities. [Link]

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