U.S. stocks have produced strong returns in recent years, but the overall performance of the S&P 500 masks a growing risk in the portfolio: The sources of returns have become highly concentrated in a few individual technology companies.
In the first nine months of 2026, the S&P 500 returned 12.7%. At the same time, five stocks accounted for 52% of this result (reflecting the contribution to the movement (dynamics) of the index), the top 10 - 65% and the top 20 - 87%, which demonstrates a record reduction in market breadth not seen since the late 1990s. As of September 30, this dynamic meant that the top five stocks made up 28% of the capitalization-weighted index (reflecting the static size (mass) of the companies in the portfolio on a given date), the top 10 - 39%, and the top 20 - almost half.
This concentration occurred both at the industry level and among individual components. As of September 30, the information technology sector accounted for 40% of the S&P 500, while the technology sector contributed nearly half of the index's returns over the previous three years.
Market concentration itself does not necessarily indicate an impending correction. Moreover, there is an important difference between the situation today and the boom of the late 1990s, which was also led by the technology sector. During that period, the market rally was fueled by overly optimistic earnings growth expectations and a simultaneous rise in earnings multiples. From March 1997 to March 2000, the S&P 500 rose 98% while forward earnings rose only 32%, pushing the forward price/earnings (P/E) multiple to 25.5x. In contrast, the S&P 500 is up 78% over the past three years, while forward earnings haven't lagged behind, posting an impressive 66% gain and a forward P/E multiple of 21.2x.
However, this does not eliminate the risk of concentration. By the end of 2025, the 10 largest companies in the S&P 500 accounted for more than half of the index's volatility.