What Does Large-Cap Concentration Imply About Future Returns?

Recent large-cap dominance represents its ninth major leadership cycle in the last 100 years. Past cycles of concentration ended more favorably than you might expect.

The U.S. stock market has been driven by “concentration” for almost a decade.  Among the biggest stocks (those whose market capitalization comprise the largest 30% of all stocks on the NYSE, NASDAQ and AMEX exchanges), the market-cap weighted (MCW) index has consistently outpaced the equal-weighted (EW) index.  The performance of the MCW index is driven…