Thread by @lhamtil

NEW POST: Howard Marks's 2001 cautionary tale of index-only investing, and lessons for today's investors

fortunefinancialadvisors.com/blog/a-caution…

An excerpt from Howard Marks's 2001 memo that got me thinking about this:

oaktreecapital.com/docs/default-s…

The last time the top 5 names made up so much of the S&P 500 was in 1999. They were:

Microsoft
GE
Cisco
Wal-Mart
Exxon

Unlike today, not all of them were tech or quasi-tech stocks.

Last year, I noted that the S&P 500's concentration at the top was historically average. However, that has changed a bit. Now, both the top 5 and top 10 names make up a not insignificant amount more of the index than their long-term average.

Further evidence of froth at the top: the top sector weighting (currently Tech at about 26%) is the highest it has been (based on annual data & 6/30 for 2018) since 1999

Forming a composite of the weighting of the top ten constituents and top sector weighting shows the same story

I guess the concentration in the top 5 S&P names is set to be reduced just a bit tomorrow

Incidentally, this may better illustrate the impact of a few large tech companies on the S&P 500. The equal-weighted S&P 500 has 11% less tech exposure.

However, as @choffstein points out, all of this is going to change a lot with the new Comms sector.

MSCI's indices show much the same picture