The S&P 500 (^GSPC) is thought of as a broad market index, but is that really accurate when it’s concentrated in just a handful of stocks?
In this episode of Stocks In Translation, Yahoo Finance’s Markets and Data Editor Jared Blikre examines “market concentration,” when a small number of stocks in an index or an investor’s portfolio account for most of the gains.
Joined by Yahoo Finance’s Sidney Freed and The Lead-Lag Reports publisher Michael Gade, the group dives into a discussion of narrow bull markets. “It’s debatable whether the S&P 500 is truly a diversified index,” Gade adds, “when some stocks are losing steam overall.” Gade offers a path to diversification for passive index-only investors, explaining that it’s trading algorithms, not humans, that drive stock prices up or down as the market reacts to economic data.
Birkre and his team also discussed zombie companies, the Pareto principle, and Japan’s impact on last week’s volatility. “The carry trade has been going on for years. It’s not something that can be solved in 48 hours,” Gade added.
For more expert insights and the latest market trends, click here.
A transcript of this episode and other episodes of Stocks in Translation are available at https://finance.yahoo.com/videos/series/stocks-in-translation.
This post was written by John Tejada.