Is the US-stock market concentration too much or justifiable? Michael Mauboussin answers

The rising dominance of a few companies in US stock market indices is causing concerns about a possible bubble, challenging active fund managers to beat the benchmark. Michael Mauboussin and Dan Callahan from Counterpoint Global Insights suggest that the concentration might have been mispriced in the past. They also found that large-cap stocks' economic profit aligns with their market capitalization share. \r

However, this concentration makes it tough for active managers, as they tend to own smaller market cap stocks. Additionally, periods of rising concentration tend to yield better market returns. Historically, the top stock has been a poor investment, while the second and third perform better. \r

Overall, sustainable competitive advantage and growth assessments will guide the market's path forward.