Thirty-five percent of the increase in the S&P 500’s market cap since the beginning of the year has come from one stock, see the chart below. Such a high concentration implies that if NVIDIA continues to rise, then things are fine. But if it starts to decline, then the S&P 500 will be hit hard.
The bottom line is that the extreme concentration of returns in the S&P 500 makes investors more vulnerable to single headlines impacting the one stock driving index returns.
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