Concentration in the S&P 500® Index has reached extreme levels and performance has been severely skewed by a few mega-cap companies. But, history suggests that high concentration could spell opportunity, particularly for investors who understand the limitations of cap-weighting.
RETURN SPREAD BETWEEN THE TOP 10 AND BOTTOM 490 STOCKS IN THE S&P 500 INDEX August 1, 1991 to February 28, 2019
This graph illustrates the differential (spread) in 1-year trailing returns between the 10 largest S&P 500 constituents by capitalization weight, as of each quarter-end, and the remaining 490 index constituents. After peaking at 17.8% in late 2018, which is a level of concentration we haven’t seen since the late 1990s, the return spread is now -1.6%.
CHANGING OF THE GUARD: TOP TEN LIST HAS EVOLVED
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Only two stocks, Microsoft and Exxon, have remained in the top 10 of the S&P 500 Index over the last two decades, proving that change is the only constant.
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All investing involves risk, including potential loss of principal.
The S&P 500® Index is an unmanaged market-capitalization-weighted index generally considered to be representative of U.S. equity market activity. The index consists of 500 stocks representing leading industries of the U.S. economy. Index results assume the reinvestment of dividends paid on the stocks constituting the index. Indexes are unmanaged and not available for direct investment and do not represent the performance of a single fund or any Victory Funds.
VictoryShares ETFs are distributed by Foreside Fund Services, LLC. Victory Capital Management Inc. is the adviser to the VictoryShares ETFs. Victory Capital is not affiliated with Foreside Fund Services, LLC.
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