You can't breathe in without at some point also breathing out. Sometimes we take a very deep breath, and we may even hold it for a period of time, but there is no chance we don't breathe out again. Not doing so leads to unfortunate outcomes.

With that in mind, let's look at the latest deep, deep breaths in financial markets.

As much as I loathe them, a recent report from the criminal class, specifically, JPMorgan, where they've highlighted some of the issues.

Key Takeaways

The recent rise in stock market concentration has been the steepest in 60 years, with just a few stocks driving most of the returns.

Today, the top 10 stocks by market cap account for approximately 29.4% of the overall equities market.

Historically, a steep rise in stock market concentration has always reversed, with the S&P 500 equal-weighted index outperforming the market cap-weighted index.

The stock market has experienced its steepest concentration rise in 60 years, with a small number of stocks driving most returns (Nvidia ring a bell?).

This trend is a not an entirely surprising byproduct of the massive migration from "active" to "passive" funds since the 2008 crisis, which has further been amplified with the rapid shift from a zero-interest-rate policy (ZIRP) to "higher-for-longer." A recent piece from JPMorgan notes:

Sharply higher rates and a slower growth outlook have resulted in an outflow from long-duration and cyclical assets. Mega-cap companies have been beneficiaries of this market rotation, as they offer attractive liquidity, sustainable growth, and much stronger pricing power,

This shift has led to a significant divergence in index weight concentration between mega-cap stocks and the next tier of large caps. Currently, the top 10 US stocks by market cap make up almost 30% of the total equities market.