Extreme Concentration in the S&P 500
Friday, July 11th, 2025
World News — Trump Floats Tariff on Canada
FT
U.S. President Donald Trump has announced that, starting August 1, a sweeping 35% tariff will be imposed on Canadian imports, escalating trade tensions between the two countries. This move follows a formal letter to Canadian Prime Minister Mark Carney and comes amid threats of similar tariffs—ranging from 15% to 20%—on other U.S. trading partners, as well as imminent levies of 50% on copper and other goods. Trump cited issues such as the flow of fentanyl across the border, Canadian trade practices, and a perceived trade deficit as reasons for the new measures. While some exemptions may apply for goods compliant with the U.S.-Mexico-Canada Agreement, no final decisions have been made, and the economic impact could be significant given the highly integrated nature of North American supply chains. Last year, trade between the U.S. and Canada exceeded $760 billion, with many industries—especially automotive and energy—deeply intertwined. The announcement caused the Canadian dollar to drop and U.S. stock index futures to decline, highlighting the potential for wide-ranging economic consequences.
Tech — Nissan’s Bet on Hybrid Cars
Nissan is preparing to launch its third-generation e-Power hybrid technology in the U.S. market in 2026, targeting the Rogue SUV as its debut model. This latest version of e-Power, which has already seen success in Europe and Japan, boasts a 15% improvement in fuel efficiency over previous iterations, addressing earlier concerns about highway economy that kept it out of the American market. Unlike conventional hybrids, Nissan’s e-Power uses a gasoline engine solely to generate electricity for a battery, which then powers an electric motor that drives the wheels—delivering a driving experience closer to a fully electric vehicle, with quieter operation and quicker response. The system’s improved efficiency and EV-like feel are expected to help Nissan regain ground in the hybrid segment, though analysts note the company may have missed the peak window for hybrid sales in the U.S. Nissan plans to localize more Rogue e-Power production within the U.S. to mitigate the impact of auto import tariffs, while also aiming to leverage shared components with its electric vehicles for potential cost advantages. Despite these innovations, Nissan faces challenges from strong competitors, shifting market dynamics, and the rapid advancement of rival technologies, especially from Chinese manufacturers.
Crazy to think what was a stable car market a few years ago was quickly disrupted by the EV revolution, led by Tesla, improved by the Korean automakers, and perfected by the Chinese EV makers.
Business — Volatile Cocoa Price Is Affecting the Chocolate Market
FT
Barry Callebaut, the world’s largest cocoa processor, has cut its sales volume outlook for the third time this year due to “unprecedented” volatility in cocoa prices, now expecting a 7% decline in sales volumes for the year ending August, compared to its earlier forecast of a mid-single-digit drop. The company cited a 43% year-on-year surge in cocoa prices, driven by adverse weather and crop disease, which has hurt demand and led to the worst global chocolate market decline in a decade. Despite the steep drop in sales volumes—down 6.3% over nine months and 9.5% in the third quarter—Barry Callebaut’s revenue rose nearly 50% as it passed higher costs onto customers, though this has disrupted ordering patterns and further weighed on demand. The company is responding by prioritizing higher-margin segments, launching cost-saving initiatives, and seeking to optimize its supply chain, but analysts warn that the short-term outlook remains bleak as the industry continues to grapple with high inventories and ongoing price instability.
Culture — Can Volkswagen Reinvent Itself in the Age of EV
The Daily Spark
The concentration in the S&P 500 has returned to extreme levels, with the top 10 companies accounting for 40% of the index’s market capitalization and a record-high share of earnings, see chart below.
The extreme index concentration in tech is obviously not good for investors seeking to diversify their investments across 500 different companies. Anyone investing in the S&P 500 index today is basically making a bet on the Magnificent 7 stocks propelling even higher.
Song Recommendation — Beauty and the Beast
Quote of the Day
"Do not be deceived by appearances, for beauty is found within." - Beauty and the Beast