Here’s what’s necessary to return the incredibly concentrated U.S. stock market to normal levels

MarketWatch

by Steve Goldstein

February 26, 2026

AI-Generated Deep Dive Summary

D.E. Shaw, a prominent hedge fund manager known for his analytical approach, has conducted an in-depth study to determine how long it might take for the highly concentrated U.S. stock market to return to more normal levels. His research highlights the current imbalance caused by a small number of high-growth tech stocks dominating the market, which could pose risks to overall stability. Shaw’s analysis suggests that this normalization process may take several years, depending on factors like market trends and investor behavior. The U.S. stock market has become increasingly concentrated, with major technology companies like Apple, Amazon, Facebook, Netflix, and Google (collectively known as FAANG stocks) making up a significant portion of the S&P 500’s valuation. This concentration is further amplified by institutional investors favoring these large-cap tech firms, which has led to even greater market dominance. Shaw points out that this trend could lead to heightened volatility if there are significant downturns in the tech sector or broader economic shifts. Shaw’s study also underscores the importance of diversification in mitigating risks associated with market concentration. He emphasizes that while these tech giants have driven much of the market growth, relying too heavily on them can create vulnerabilities. His analysis aims to provide investors and financial professionals with a clearer understanding of how long it might take for the market to balance out and reduce its reliance on a few dominant players. This matters significantly for anyone interested in finance because market concentration affects investment strategies, risk management, and overall economic stability. By understanding the potential timeline for normalization, investors can make more informed decisions about diversification and portfolio allocation. Shaw’s work serves as a reminder of the importance of maintaining a balanced approach to investing, especially in an era where a few companies dominate market movements

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Originally published on MarketWatch on 2/26/2026