Index Funds Face 3 Risks as US Stocks Hit 24.3 P/E and Treasuries Top $40 Trillion
Updated
Updated · Morningstar · Sep 16
Index Funds Face 3 Risks as US Stocks Hit 24.3 P/E and Treasuries Top $40 Trillion
3 articles · Updated · Morningstar · Sep 16
Summary
Morningstar flagged three current risks for index-fund investors: a concentrated, expensive US stock market, a Treasury-heavy bond market, and emerging-market indexes increasingly dominated by AI-linked chip stocks.
Nine US stocks now have $1 trillion market caps, with Nvidia near 7% of the US total-market index and tech above one-third of market value; the market traded at 24.3 times trailing earnings at end-August.
US government debt has passed $40 trillion, lifting Treasuries' weight in core bond indexes and leaving the Morningstar US Core Bond Index slightly negative for 2026 even as its yield rose to about 5%.
Taiwan Semiconductor alone made up more than 14% of Morningstar's emerging-markets universe at end-August, while Samsung Electronics and SK Hynix added another 12%, tying the asset class more tightly to the AI theme.
Morningstar's takeaway was not to time exits but to diversify—using small caps, non-US developed equities, alternative US equity strategies, and broader fixed-income exposure to reduce concentration risk.