This Odd Lots podcast episode features an interview with Kevin Muir, a macro trader and blogger known as "The Macro Tourist," to discuss market concentration risk. The hosts and Muir explore the increasing concentration of the S&P 500 in a few large tech companies (the "MAGA7"), analyzing the implications for investors and the role of index providers like Russell in managing this risk. Muir highlights the 25-5-50 rule (an IRS regulation limiting concentration in investment portfolios) and how index providers are adapting to this concentration, citing examples like the Russell 1000 Growth Index's adjustments to its weighting methodology. A key takeaway is that the increasing concentration, while driven partly by passive investing, also presents challenges for portfolio managers and raises questions about market efficiency and the future of indexing.
