The Stock Market Loves Monopoly Concentration

Today on TAP: That’s another case for the revival of antitrust.

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The financial press has been filled with reports of how the lion’s share of the stock market run-up in 2023 was concentrated in just seven companies, which have been dubbed the “Magnificent Seven.” These seven companies account for 28 percent of the value of the entire S&P 500, and more than 60 percent of the 2023 increase in the value of the broad market.

Without them, the stock market gain in 2023 was a quite unremarkable 9 percent after inflation.

The Wall Street Journal has been making a big deal of this for months, and lately The New York Times has gotten on the bandwagon.

Who are the Magnificent Seven? They are Alphabet (Google), Amazon, Apple, Meta (Facebook), Microsoft, Nvidia, and Tesla. Five of these will be familiar as the largest platform monopolies. They had a supernormal run-up in the stock prices because they have supernormal profits. And they have supernormal profits because of their monopoly power.

More from Robert Kuttner

Ownership of the shares of these companies is also highly concentrated. Just four investors hauled in $491 billion last year from the stock run-up. Ownership in stocks as a whole reflects the wealth inequality of the society, with the richest 1 percent owing 54 percent of all stocks. The stock market gains of 2023 made them about $5 trillion richer.

(The other two companies in the Seven are Tesla, a onetime near-monopoly, whose stock has been plummeting in 2024 along with Elon Musk’s mood swings; and Nvidia, a dominant company in the burgeoning field of AI.)

Belatedly, the Federal Trade Commission and the Antitrust Division of the Justice Department have launched several cases against the platform monopolies. If the government prevails, that will squeeze out some of the excess profits. That would be good for consumers, for competitors, and for the deconcentration of extreme wealth.

A soaring stock market is often equated with the strength of the economy—but not when it’s rooted in this kind of monopoly power. Sometimes, a bull market is an indicator of the economy’s ill health.

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