The US Large-Mid Index reached a new high in October, but the median stock in the index is trading 15% below its peak. 9 of the top 10 stocks are up and are tech and communication giants. 76% of utilities stocks are near their highs, while only 21% of real estate stocks are. High concentration poses risks for investors if top companies stumble.
The Large-Mid Index shows a market of haves and have-nots. 78% of the October gains came from just 3 mega-cap tech companies. Majority of stocks are not hitting 52-week highs. The median stock is still below its peak, indicating fewer stocks are contributing to the rally compared to 2024.
In the Large-Mid Index, 9 of the top 10 stocks are near their highs, with tech leading gains. Half of large-cap stocks are close to their highs, while only 8% of small caps are. Utilities stocks are performing well, driven by data center energy demand. Real estate and consumer defensive stocks are struggling due to inflation and rising interest rates.
Tech sector dominates the market, accounting for over half of gains and losses in the past year. In the third quarter, tech added 4.1 points to the index’s 8.2-point rise. The concentration is also seen in individual stock returns, with AI-related stocks outperforming others.
Market concentration is at a historically high level, with the top 10 companies in the S&P 500 accounting for 40% of the index. If these top companies stumble, broad market indexes are likely to follow. Investors should be cautious of the risks posed by extreme market concentration. The US Large-Mid Index reached a record high in October, but the median stock in the index is trading 15% below its 52-week high. Nine of the 10 largest stocks are up within 10% of their 52-week highs, all in technology and communications. Utilities stocks are performing better than real estate, with 76% near their 52-week highs compared to just 21%. High concentration in the market poses risks for investors, as a stumble by major names could bring down broad market indexes.
Read more at Morningstar
The US Large-Mid Index reached a record high in October, but the median stock is down 15% from its peak. Tech and communication giants make up the top 10 stocks, with 9 near their highs. However, only 21% of real estate stocks are trading near their 52-week highs, compared to 76% of utilities stocks. High concentration poses risks for investors.: Few Stocks at 52-Week Highs, Even as Market Hits Records