Please select your audience so that we can direct you to the most appropriate content.
Select Country
menu
Active & Passive Equities Chart

Record US Index Concentration Adds Hazards for Investors

06 July 2020
2 min read
| Chief Investment Officer—Concentrated US Growth
US Growth: Largest Stocks and Top Performers Have Shifted Over Time
US Growth: Largest Stocks and Top Performers Have Shifted Over Time

Past performance does not guarantee futur results.
As of June 30, 2020
*Cumulative returns shown for Time Warner are from June 1, 2001 to June 14, 2018, prior to AT&T merger
Peaks shown are for the last day of each month displayed.
Source: FactSet, Russell Investments and AllianceBernstein (AB)

US growth companies led the second-quarter rebound, fueled by the five largest technology and new media stocks, which now comprise more than a third of the Russell 1000 Growth Index (R1000G). Investors should be alert to the risks of high benchmark concentration.

By the end of June, Microsoft, Apple, Amazon, Alphabet Inc. (Google) and Facebook made up nearly 37% of the R1000G. That’s the highest absolute concentration this index has ever seen.

Giants Don’t Dominate Forever

Turnover at the top has been frequent. Yesterday’s giants didn’t remain at the top forever. In the past, the largest growth companies included leaders in energy, healthcare, industrials and consumer staples. Some dropped far down in the growth rankings, while others fell off the growth index entirely.

Many of these companies experienced performance challenges that undermined their dominant positions. Since the three previous periods when index concentration peaked, in only four instances has a top-five company gone on to outperform the R1000G.

Will Regulatory Risk Prompt a Change in Sentiment?

Today, technology, communications and e-commerce companies dominate the top slots, making for very narrow leadership. Their dominance has also led to a record concentration of US stocks in the MSCI World Index at nearly 66%—more than double 30 years ago. But as investors well know, past performance doesn’t guarantee future results.

That doesn’t mean these companies are bad investments as individual holdings. Each enjoys powerful business drivers as well as strong growth potential. But we think it’s imprudent to assume that all five will continue to lead the market indefinitely, especially with growing regulatory pressure threatening their dominant positions. US and European antitrust investigations are under way, while new acquisitions are facing increased scrutiny and ad-spending boycotts are spreading. And given the high correlation of returns for these stocks, investors seeking to capture growth through a passive portfolio that claims to offer diversification will actually have more than one-third of their risk concentrated in five names.

When a company’s growth drivers are compromised, investor sentiment can reverse very quickly. Investors should make sure they aren’t too heavily exposed to a small group of very large stocks—via passive or active portfolios—that may be subject to unpredictable risks.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Views are subject to revision over time.

About the Authors

James T. Tierney, Jr. is Chief Investment Officer of Concentrated US Growth. Prior to joining AB in December 2013, he was CIO at W.P. Stewart & Co. Tierney began his career in 1988 in equity research at J.P. Morgan Investment Management, where he analyzed entertainment, healthcare and finance companies. He left J.P. Morgan in 1990 to pursue an MBA and returned in 1992 as a senior analyst covering energy, transportation, media and entertainment. Tierney joined W.P. Stewart in 2000. He holds a BS in finance from Providence College and an MBA from Columbia Business School at Columbia University. Location: New York

More For You

A row of purple flowers stands elegantly in the foreground of a vast lake and mountain landscape.
Investment Insights
Finding Growth in US Stocks Beyond the Technology Sector

Technology stocks have been the poster child for growth in recent years. Other sectors deserve a closer look today.

John Fogarty, Adam Yee | 30 January 2025
Five blocks with a star in the middle of each are lined up against a window, each casting a shadow forward.
Investment Insights
Five Questions to Ask About Quality in Equity Portfolios

Quality has become a popular buzzword in equity investing. But what does it really mean?

Nelson Yu, Walt Czaicki | 27 January 2025
A kayaker in a red kayak deftly navigates ice floes.
Investment Insights
Can European Stocks Overcome Fallout from “America First” Agenda?

European equity markets may look vulnerable to fallout from new US policies. But some companies offer investors reasons to cheer.

Thorsten Winkelmann, Marcus Morris-Eyton | 21 January 2025

This website is authorized for use only by registered broker-dealers and is not authorized for use by the general public. The material contained herein is not for inspection by, distribution or quotation to, the general public. The sale of shares of AllianceBernstein funds may be restricted in certain jurisdictions. In particular, shares may not be offered or sold, directly or indirectly, in the United States or to US persons, as is more fully described in the prospectus with respect to each fund. Shares of AllianceBernstein funds are offered only pursuant to the fund's current prospectus together with the most recent financial statements. The information on this page is for information purposes only and should not be construed as an offer to sell, or solicitation to buy, or a recommendation for the securities of any AllianceBernstein fund.

AllianceBernstein provides its investment management services in Canada through its affiliates Sanford C. Bernstein & Co. LLC and AllianceBernstein Canada, Inc. Shares of the AllianceBernstein Luxembourg funds described herein are not registered in Canada for public sale to Canadian resident investors. 

© 2025 AllianceBernstein L.P.