You imagine your exposure to mega-cap tech stocks these days isn’t excessive? Consider it again. The most recent Hitchhiker’s Guide to the Investment Universe by Bank of America analyst Michael Hartnett, might astonish pension fund investors who don’t realise the substantial amount of their retirement funds linked to few technological behemoths.
He highlights that the United States now represents 65% of global stock market capitalisation, an unprecedented height. Currently, Europe and Japan share in the worldwide market which is only 20%, almost slashed in half since 2008 when it was 39%.
In fact, the market value of America’s tech sector surpasses the collective value of Europe and Japan’s stock markets. A mere seven American stocks comprise more than a third of the entire American market. On a global level, the foremost 10 stocks now represent a quarter of worldwide stock market capitalisation, up considerably from 10 per cent in March 2009.
The notion of diversification is not the same as before. The financial markets are perceived to be smaller than ever.