The top 10 global stocks by market value have a greater hold than ever before on the capital markets, and that could be a bad thing, says Ned Davis Research. The Wall Street firm said the top 10 names by market cap in the All Country World Index (ACWI) now account for nearly one-fifth, or 19%, of the value of the benchmark — a record in terms of concentration, according to a Monday note. Not only are all U.S. companies, the top seven — Alphabet , Apple , Amazon , Meta Platforms , Microsoft , Nvidia and Tesla — are the usual suspects that have enjoyed huge rallies this year on artificial intelligence enthusiasm. Apple is higher this year by 36%, while Alphabet is up by 55%. But if history is any indication that could mean choppy waters ahead for investors. Ned Davis found that a heavy concentration in the years 2000 and 2021 was soon followed by a bear market. However, there was an exception in 2020, when the rise in a handful of stocks broadened out and supported a bull market. “Will the current concentration lead to an outcome reminiscent of 2020 or is it the precursor of a bear market, as in 2000 and 2021?” wrote Tim Hayes, chief global investment strategist at the firm, in the research note. .SPX YTD mountain S & P 500 YTD Investors will have to watch carefully how stocks navigate seasonal challenges in September to answer that question. If the current uptrend manages to hold, then equities could repeat 2020 and continue to climb. Ned Davis is watching for aggregate strength in key 50-day and 200-day indicators. However, stocks could fall into a bear market if the rally this year fails to expand to more sectors, the firm said. “While the cap-weighted ACWI is still well above its rising smoothing, the equal-weighted index is just above it. With the equal-weighted index underperforming and the Rally Watch aggregate failing to rebound, the market would be increasingly exposed to a megacap setback,” Hayes wrote. “But if we see a year-end advance with increasing participation and receding concentration, then we’ll have more confirmation that the bull market is well intact and sustainable,” he added.