The Stock Market Flashes a Warning Seen During the Dot-Com Bubble. History Says the S&P 500 Will Do This Next.

The "Magnificent Seven" stocks achieved an average return of 335% during the last five years, while the S&P 500 (SNPINDEX: ^GSPC) advanced 92%. That dramatic outperformance has led to those companies becoming a large part of the overall index. The Magnificent Seven account for one-third of the S&P 500 by market value.Lisa Shalett, chief investment officer at Morgan Stanley, sees that concentration as a substantial risk. Not just because seven companies represent a large percentage of the entire U.S. stock market but also because they trade at expensive valuations.Indeed, Shalett says the Magnificent Seven are currently as expensive relative to the other 493 companies in the S&P 500 as the biggest stocks were at the peak of the dot-com bubble. "That sort of concentration in the S&P 500 can lead to greater volatility and the potential for significant drawdowns."Continue readingWeiter zum vollständigen Artikel bei MotleyFool Weiter zum vollständigen Artikel bei MotleyFool