Stock market poses potential, overlooked danger for investors?
Get the scoop on the stock market! Here's what's buzzing lately, making quite a few investors fret. Is another major market correction on the cards?
It's been a grand year for the stock market in 2024, to the point that investors now worry the valuations formed during this period might be inflated, ready for a correction. A current signal is also raising eyebrows, serving as a clear warning.
Is this signal flashing red for the stock market?
The concentration of the S&P500, compared to its equally-weighted benchmark index, has reached a staggering level unseen since 1964. This information was highlighted in a recent study by Bianco Research.
Back in the '60s, the top 5 stocks couldn't maintain their straitjacket grip and eventually reduced their weight over time due to the broader market underperforming them. The journey wasn't smooth either, with some sharp corrections happening along the way.
Now what? Strategize for safety.
Whether history will repeat itself in 2025 with the "Magnificent Seven," as it did over 60 years ago, remains uncertain. But one thing is crystal clear: the concentration of weight in a few stocks has long served as a red flag in the past, significantly increasing the investment risk in the stock market.
Ancient wisdom suggests investors should consider ETFs that don't weigh by market capitalization but instead evenly distribute the weight. For the S&P500, this would be the Xtrackers S&P 500 Equal Weight UCITS ETF (WKN: A1106A). For the MSCI World, the Invesco MSCI World Equal Weight UCITS ETF (WKN: A40G12) is your friend.
Those who still have an itch to back the Magnificent Seven and believe in their indomitable spirit can check out the BÖRSE ONLINE Tech Giganten Index.
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Disclaimer: The price of the financial instruments here is derived from an index serving as the underlying. Börsenmedien AG has developed this index and owns the rights to it. Börsenmedien AG has collaborated with the issuer of the displayed financial instruments, granting the issuer a license to utilize the index. Consequently, Börsenmedien AG receives compensation from the issuer in this regards.
The concentration of the S&P500, reaching levels unseen since 1964, might be a red flag for potential investment risk in the stock market. To mitigate this risk, investors could consider ETFs such as the Xtrackers S&P 500 Equal Weight UCITS ETF (WKN: A1106A) or the Invesco MSCI World Equal Weight UCITS ETF (WKN: A40G12), which don't weigh by market capitalization but instead evenly distribute the weight.
