How Concentrated is the US Equity Market?

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The concentration in the US equity market has been running relatively high for the past few years. I have written many times on this topic as can be found here and here and here. Most of the time, I have discussed the concentration using the S&P 500 as the benchmark. However I came across an article recently that showed the market concentration extends to all US stocks and that the level of concentration is reaching historic peaks. For instance, the current concentration levels exceed the dot-com, nifty-fifty, post World War II eras and is heading towards the Great Depression era peak. This is indeed surprising.

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Source: What performs best after peaks in market concentration?, by Benjamin R. Nastou, Derek W. Beane, Jonathan Perlman at MFS Investment Management, Australia

I agree with the authors that high concentration does not mean a major decline is coming to the markets but it is wise to pay attention to such facts and make one’s investment decisions accordingly.

Related ETFs:

  1. SPDR S&P 500 ETF (SPY)
  2. iShares Core S&P 500 ETF (IVV)
  3. Vanguard S&P 500 ETF(VOO)
  4. SPDR Portfolio S&P 500 ETF  (SPLG)

Disclosure: No positions

On The Returns of S&P 500 During Recessions

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Recessions are generally negative for equity returns. During recessions, economic contraction leads to lower production and consumption leading to hurt sales for companies. Currently the US economy is holding up but nobody knows if it will slip into a recession later this year or early next year. As a consumption-based economy, the US consumer hasn’t slowed down spending.

From an investor perspective, it is important to keep an eye on the direction of the economy. One report by Schroders showed that the S&P 500 generates a negative return during recessions. However in the late stages of a recession, the index yields a positive return as shown below:

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Source: Ten key themes for 2023 and beyond, Schroders

For long-term investors recessions are bad. Since it is almost impossible to predict when a recession would end it is highly unlikely for anyone to make a profit with stocks while the economy is in recession. Most investors are likely to ride out the recession though they may not add new funds to the market.

Related ETFs:

  1. SPDR S&P 500 ETF (SPY)
  2. iShares Core S&P 500 ETF (IVV)
  3. Vanguard S&P 500 ETF(VOO)
  4. SPDR Portfolio S&P 500 ETF  (SPLG)

Disclosure: No position

The Key Semiconductor Manufacturing Countries: Chart

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Semiconductor manufacturing is one of the highly technical and complex process in the world. Very few nations have the capability to make them. In fact, according to a report by Matrade agency of the Malaysian government, just 11 countries manufacture them. Out of these 6 of them are Asian countries as shown in the graphic below with Malaysia being one of them.

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Source: Matrade

It is not surprising that China is one of the major semiconductor makers.

Related stocks:

The Historical Average Annual Returns of Australian Stock Market From 1900 To 2023

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The Australian stock market as measured by the The ASX All Ords index has returned 13% per year for the duration from 1900 to 2023 according to the updated chart from ASX. This return indicates total return which includes dividends reinvested. Of course, no investor invests for such a long term. However the key point to remember from such charts is the importance of investing for the long-term which can mean different time for investors depending on their risk tolerance. It can be as low as 5 years to a few decades.

Australian stocks have generated positive returns in 100 of the 124 years as shown in the chart below. To put it another way that is 81% of the time from 1900 to 2023.

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Source: ASX via Why I’m a perma-bull on stocks by James Gruber, Firstlinks

James also noted another fascinating fact in the above article. If an investor holds stocks for seven years or longer, the chances of earning a positive return in Australia and other global markets is nearly 100%.

The following table shows the Annual Total Returns of Australian Stock Market from 1900 to 2023:

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Source: Market Index

Download:

Related ETFs and ADRs:

Disclosure: No positions

Cigarette Taxes in Europe, 2024: Chart

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Cigarette Taxes in Europe are high and vary widely across countries. In fact, smokers pay more in taxes than on the cigarettes themselves. The EU requires member states to charge a minimum excise tax which is a fixed amount per pack of on cigarettes and other tobacco products. In addition EU countries add an additional percentage of the sales price which raises the prices more.

The highest taxes are in the developed EU countries while the lowest are in the East European countries of the EU. The following chart from the Tax Foundation shows the variance of cigarette taxes in Europe:

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Source: Tax Foundation

For the full data of tax rates on all the countries click on the above link.