Barclays’ trading desk is sounding the alarm on what might be the market’s most crowded trade. The bank is advising investors to purchase protection against a potential decline in the S&P 500, driven specifically by cracks forming in the technology sector that has carried the index for years.
Tech’s weight problem
Here’s the number that should make every portfolio manager pause: technology stocks now account for more than 39% of the S&P 500’s total market capitalization. That is higher than the concentration levels seen during the 2000 internet bubble, a period that ended with a multi-year drawdown that wiped out trillions in wealth.
Barclays’ recommendation to buy protection rather than simply reducing exposure suggests the bank sees the risk as asymmetric. The upside from staying fully invested in tech may be incremental at this point, while the downside from a sharp rotation or correction could be severe.
The Broadcom catalyst
