Part 2 of 5
Is the Market "Expensive"? And Why a Few Giants Holding It Up Matters
Last time, we looked back at 1929. Today, two questions worth understanding about the market right now — and why the honest answers are more about awareness than alarm.
Two words have been showing up a lot in the financial news lately: expensive and concentrated.
They sound technical. They're not — and understanding them is genuinely useful. In the first article of this series, we revisited 1929 to separate a market crash from a true catastrophe. Today we turn to the present, and to the thing that prompted this whole series: a small group of companies, most tied to artificial intelligence, have grown to carry an outsized share of the entire market.
Two fair questions follow. Is the market expensive? And does it matter that so few companies are holding it up? Let's take them one at a time.
What "expensive" actually means
Whether a stock is cheap or expensive has surprisingly little to do with its price tag. A $500 stock can be a bargain, and a $20 stock can be wildly overpriced. What matters is what you're paying relative to what the company actually earns. Pay $20 for a business that earns $2 a year, and you're paying ten times its earnings. Pay $40 for that same $2, and you're paying twenty times — twice as much for the very same dollar of profit.
By those kinds of long-term measures, U.S. stocks today are historically expensive — sitting in the same rare territory they reached in the late 1920s and again at the peak of the dot-com era in 2000. That sounds ominous, so here is the part that matters most:
Expensive does not mean a crash is coming. Think of valuation as altitude, not a clock. A plane flying very high isn't about to fall out of the sky — it can cruise up there for a long time. But if something does go wrong, there's less room to recover and the fall is farther. High valuations work the same way: they don't tell you when anything will happen, only that there's less cushion if it does.
If you're curious — the technical side How "expensive" is actually measured Click to read more →
The simplest gauge is the price-to-earnings ratio, or P/E: a stock's price divided by its yearly earnings per share. A P/E of 20 means investors are paying $20 for every $1 the company earns.
To judge the whole market, analysts often use a version called the CAPE ratio (or "Shiller P/E"), which compares prices to the average of ten years of inflation-adjusted earnings — smoothing out booms and busts so a single unusual year doesn't fool you. When that figure climbs into the low-to-mid 30s or higher, the market has historically been in expensive territory; the two clearest peaks on record were 1929 and 2000. It's a rear-view mirror, not a crystal ball — but a useful read on how much optimism is already baked into today's prices.
Why a few giants holding it up matters
Now the second question. In recent years, a handful of giant companies have grown to make up roughly a third of the entire U.S. stock market — the most top-heavy it has been in about half a century.
Picture a large, heavy table. If it rests on a dozen sturdy legs, you can lean on it without a second thought. Now imagine that same table held up by just three or four. It might hold beautifully — but if one leg wobbles, the whole table tips. A market is no different. When a few enormous companies carry most of the weight, the market's fate becomes tied to theirs, for better and for worse.
If this rhymes with something, it should. In the 1920s, the breakthrough technology wasn't AI — it was radio. And one company towered over it: the Radio Corporation of America, RCA. Radio was so thrilling that, as one historian put it, simply having "radio" in a company's name could send its stock soaring. RCA itself rose nearly two-hundred-fold over the decade. Then came the crash. RCA fell about 98% from its peak — and didn't reclaim its 1929 high until the 1960s.
Here's the detail worth holding onto: radio, the technology, never stopped growing. Homes kept buying radios; broadcasting boomed for decades. It was the stock — priced for a flawless future — that came back to earth. The technology was real. The price had simply gotten ahead of itself.
If you're curious — the technical side Why the pioneer doesn't always win Click to read more →
RCA's story carries a lesson that repeats: the company that pioneers a technology isn't always the one that ends up profiting from it. RCA dominated early radio, but rivals selling cheaper sets steadily chipped away at its lead, and it later missed the shift to television.
The same pattern returned decades later. Enormous sums poured into internet and telecom companies in the late 1990s — yet as the internet exploded in the years that followed, fierce competition crushed the profits of many of the era's darlings. The technology delivered; a lot of the original investments did not. It's a reminder that "this technology will change the world" and "this company's stock is a good value today" are two completely different statements — and only one of them is about price.
What this means for you
None of this is a prediction, and none of it is a reason to do anything rash. Expensive markets can keep climbing for years; concentrated ones can too. The companies leading today's market are, by most accounts, genuinely excellent businesses — just as radio genuinely was the future.
The value in understanding "expensive" and "concentrated" isn't that they sound an alarm. It's that they tell you something true about the ground you're standing on. A market that is both high and top-heavy is one where steadiness, balance, and a plan built for more than one kind of weather matter more, not less. That awareness is what turns a nervous headline-reader into a calm, prepared investor — and it's exactly the kind of thing worth talking through with whoever helps you manage your money.
Where this fits in the series
Each Friday builds on the last. Here's the road we're traveling together:
Next Friday, we'll look at the quiet ingredient that has turned ordinary market drops into historic ones, in 1929 and ever since — borrowed money.
Two things before you go
Jot down any questions this raised. Bring them to your next quarterly review — wondering whether your own plan is too concentrated, or too exposed to one theme, is exactly the kind of question we love to dig into with you.
Know someone who'd find this useful? Send it their way. Helping the people you care about feel calm and informed about their money is a gift — and we're glad to be the ones who wrote it.
Disclosure. SG Wealth Managers is an investment adviser registered with the Arizona Corporation Commission, Securities Division. This article is provided for educational purposes only and reflects general information believed accurate as of the date of publication. It is not investment, legal, or tax advice, and it is not a recommendation or solicitation to buy, sell, or hold any security or to adopt any investment strategy. Investing involves risk, including the possible loss of principal; past performance does not guarantee future results, and historical examples are simplified for illustration. Any opinions are subject to change without notice. Before acting on anything you read here, please consult a qualified professional about your individual circumstances.