US growth companies led the second-quarter rebound, fueled by the five largest technology and new media stocks, which now comprise more than a third of the Russell 1000 Growth Index (R1000G). Investors should be alert to the risks of high benchmark concentration.

By the end of June, Microsoft, Apple, Amazon, Alphabet Inc. (Google) and Facebook made up nearly 37% of the R1000G. That’s the highest absolute concentration this index has ever seen.

Giants Don’t Dominate Forever

Turnover at the top has been frequent. Yesterday’s giants didn’t remain at the top forever. In the past, the largest growth companies included leaders in energy, healthcare, industrials and consumer staples. Some dropped far down in the growth rankings, while others fell off the growth index entirely.

Many of these companies experienced performance challenges that undermined their dominant positions. Since the three previous periods when index concentration peaked, in only four instances has a top-five company gone on to outperform the R1000G.