Should investors worry about market concentration?

In the latest Goldman Sachs Exchanges podcast, experts share contrasting views on the effects of high market concentration in US equities. David Kostin points out that while market concentration is at a historic peak, it could lead to lower future returns due to heightened volatility and negative risk premiums associated with top-performing stocks. He advocates for an equal-weighted index as a more effective investment approach. On the other hand, Owen Lamont believes the worries about concentration are exaggerated, arguing that it simply reflects concentrated profits and falls within historical norms when compared to other countries. Despite their differing perspectives, both experts agree that we can expect lower returns over the next decade, largely due to the current high valuations.