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When the Giants Wobble
Hoxton Blog • When the Giants Wobble
It has been an uncomfortable week for some of the biggest names in the market.
Concerns over whether the enormous investment going into artificial intelligence will deliver the returns investors expect sent technology shares sharply lower.
Apple fell around 6% in a single day, the Nasdaq recorded its weakest run since February, and suddenly the phrase "dot-com bubble" was back in the headlines.
But here's what many investors missed.
While technology stocks struggled, the Dow Jones reached a fresh record high. That's a useful reminder that successful investing isn't simply about being invested. It's about what you own and how well your portfolio is diversified.
Source: FE fundinfo / FE Analytics. 22 May to 25 June 2026. Past performance is not indicative of future results.
The difference is clear.
Over the past month, the technology-light Dow Jones rose by almost 3%, while the technology-heavy S&P 500 slipped into negative territory. The FTSE 100 sat comfortably in the middle.
The biggest driver was sector exposure, particularly to technology.
The Hidden Risk of Success
Over the past few years, a handful of giant technology companies have become so dominant that they now account for a significant proportion of the US market.
The so-called “Magnificent Seven” have delivered exceptional returns, but their success has also created concentration risk.
Many investors own far more of these companies than they realise, simply because they represent such a large part of many index funds.
Here's the interesting part.
This year, those market leaders have not been leading at all.
Source: Exhibit A, FactSet Research Systems Inc., Standard & Poor's. Latest: 24 June 2026. Past performance is not indicative of future results.
Despite all the attention they receive, several of the largest technology companies have actually reduced overall market returns during 2026. Microsoft, Meta, and Tesla have all detracted from performance.
Instead, much of this year's progress has come from the other 493 companies in the S&P 500.
The businesses that rarely make the headlines have quietly been doing the heavy lifting.
That is exactly why diversification matters.
When a handful of stocks dominate an index, owning "the market" can quietly become a much bigger bet on a small number of companies than many investors appreciate.
Is This Another Dot-Com Bubble?
Whenever technology shares fall sharply, comparisons with 2000 quickly follow, and this is an understandable question.
Fortunately, today's market looks very different.
Source: Exhibit A, FactSet Research Systems Inc. Latest: 24 June 2026. Past performance is not indicative of future results.
One of the simplest ways to judge valuation is the price-to-earnings ratio, which compares a company's share price with its profits.
During the dot-com bubble, many of the market's biggest names traded at extraordinary valuations. Cisco reached around 130 times earnings. Oracle traded at around 120 times.
Today's technology leaders certainly are not cheap. Companies such as Nvidia, Apple, and Alphabet trade on roughly 19 to 31 times earnings.
Those valuations deserve monitoring, but they are nowhere near the extremes seen during the dot-com era.
More importantly, today's market leaders are highly profitable global businesses generating substantial cash flows. They are not speculative businesses built on future promises alone.
That does not mean they cannot fall; every investment carries risk. But today's foundations are considerably stronger than they were 26 years ago.
Diversification Still Wins
If concentration creates risk, diversification remains one of the simplest ways to manage it.
That means spreading investments across different companies, different sectors, and different asset classes, including bonds alongside shares.
This is not simply a theory. History shows it has made a meaningful difference.
Source: Exhibit A, FactSet Research Systems Inc., Standard & Poor's, Bloomberg Finance L.P. Latest: 24 June 2026. Past performance is not indicative of future results.
Since 1990, a portfolio invested entirely in equities experienced 43 separate falls of at least 5%.
Introduce a sensible allocation to bonds and those drawdowns become less frequent. A balanced 60/40 portfolio experienced only 26 such declines.
No investment strategy removes risk altogether. But sensible diversification can make the journey considerably smoother.
Shares remain one of the best drivers of long-term wealth creation. The objective is not to avoid them. It is to avoid relying too heavily on one sector, one theme or one group of companies.
When technology has a difficult week, a diversified portfolio is designed so that other parts can help provide balance.
Our View
This week's volatility is a useful reminder that the most popular parts of the market are often the most vulnerable when sentiment changes.
The answer has not changed.
Build a diversified portfolio. Maintain an appropriate balance between growth and stability. Resist the temptation to chase whichever sector has performed best most recently.
Markets will always produce weeks like this. The investors who sleep best are rarely those trying to predict the next headline. They are usually the ones whose portfolios have been built to withstand it.
As Nobel Prize-winning economist Harry Markowitz famously observed, diversification is "the only free lunch in investing", and it remains one of the simplest ways to reduce unnecessary risk without sacrificing long-term opportunity.
If you'd like to review whether your own portfolio is positioned for today's markets, our advisers would be happy to help. You can contact the team at client.services@hoxtonwealth.com or via WhatsApp on +44 7384 100200.
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