metamorworks
According to Goldman Sachs’ portfolio strategy research team, stock market concentration has increased significantly.
This happened in three ways: “the increase in the share of the US stock market in the world, the increase in the share of the technology sector, and the increasing dominance of the largest companies in most regions,” chief global equity strategist Peter Oppenheimer wrote in a note.
“Although high stock market concentration can be a sign of a bubble, it does not necessarily mean there is one. For example, when the Japanese stock market briefly became the largest in the world and reached a P/E of 67x, the largest companies in the were banks, but the market wasn’t particularly concentrated,” Oppenheimer said.
“Furthermore, while the largest stocks in the U.S. stock market are much larger in market share today than during the 2000 stock market bubble, current valuations are much lower than those typical of other recent bubble periods, dating back to The Nifty 50 era of the early 1970s, the Japanese bubble in the late 1980s and, indeed, the tech bubble in 2000,” he said.
Valuation comparison using 24-month forward P/E:
Mag.7
- Microsoft (MSFT), market weight 7%, P/E 27.2
- Apple (AAPL) 6%, 22.8
- Nvidia (NVDA) 5.3%, 31.1
- Amazon (AMZN) 4.2%, 31.1
- Alphabet (GOOG) (GOOGL), 3.6%, 16.7
- Meta platforms (META) 2.6%, 21.4
- Tesla (TSLA) 1.3%, 40.3
- Aggregate 30.2%, 25
2000 leaders of the tech bubble
- Microsoft (MSFT) 4.5%, 3.2
- Cisco Systems (CSCO) 4.2%, 101.7
- Intel (INTC) 3.6%, 42.1
- Oracle (ORCL) 1.9%, 19.0
- IBM (IBM) 1.7%, 23.5
- Lustrous (LU-OLD) 1.6%, 37.9
- Nortel Reti (NT) 1.5%, 86.4
- Aggregate 19%, 52.0
1989 Japanese financial bubble
- Japanese telegraph and telephone 6.9%, 100.1
- Industrial Bank of Japan 4.6%, 154.2
- Sumitomo Mitsui Banking 3.4%, 49.2
- Bank of Tokyo-Mitsubishi 3.3%, 49.8
- Fuji Bank 3.1%, 52.8
- Dai-Ichi Kangyo Bank 2.9%, 44.0
- Sakura Bank 2.8%, 62.1
- Aggregate 27%, 67.0
1973 Nifty50
- IBM (IBM) 7.1%, 35.5
- Eastman Kodak (KODK) 3.6%, 43.5
- Sears Roebuck 2.7%, 29.2
- General Electric (GE) 2.0%, 23.4
- Xerox (XRX) 1.8%, 45.8
- 3M (MMM) 1.4%, 39.0
- Procter & Gamble (PG) 1.4%, 29.8
- Aggregate 19.9%, 34.3