Do you remember the first time a U.S. listed company reached a market value of $1 trillion? If it doesn’t seem like that milestone was achieved that long ago, that’s because it’s only been six years (Apple, in the summer of 2018). The tech giant at that point comprised about 4% of the S&P 500 index’s total value. A nice chunk for sure, but hardly astonishing or potentially problematic.

Fast forward to mid-2024 and the value concentration has gotten far more narrow. We now have three companies (Apple, along with Microsoft and NVIDIA) that carry market values of more than $3 trillion each. The trio together comprise more than 20% of the S&P 500 index’s market value. Think about that… 0.6% of the stocks comprise more than 20% of the value. It truly is the most concentrated market we’ve ever seen.

Market technicians often monitor overall breadth closely to try and gauge general market conditions, but since I am a more fundamental investor I don’t have much in the way of statistics to share on that front. What I have noticed, though, is that the bulk of the U.S. stock market has stagnated.

Consider the Russell 3000 index (which comprises about 90% of all major exchange listed U.S. stocks) and its offshoots; the Russell 2000 (smallest 2,000) and Russell 1000 (largest 1,000). As of yesterday’s close, on a year-to-date basis, the Russell 2000 was unchanged for the year, whereas the Russell 1000 was up 14%. If we distinguish between the market-cap weighted S&P 500 index and the equal-weighted version, we see a similar pattern (cap-weighted up 15%, equal-weighted up 5%.

Narrow breadth in and of itself, while not a great sign, doesn’t concern me too much. The bigger issue I see is the euphoria surrounding a very narrow group of stocks. When my golfing buddies and young relatives (neither having showed any interest in the market before) are all talking about buying NVIDIA, all it does is remind me of other moments of maximum stock market bullishness… and how they rarely last.