Industrial concentration in the US economy has been a persistent theme over the past 3 decades.  Corporate profits’ share of GDP has shifted up to a higher level compared with any other time in the post-war period.

Source: Bloomberg, Macrobond, Variant Perception

The total number of large companies in the US has not changed since 2000.

Source: Bloomberg, Macrobond, Variant Perception

More pricing power for corporates, without the benefit of globalization lowering costs, is a bad recipe for consumer price inflation.  Previous ECB papers looking at EU data have found that “higher product market competition reduces average inflation rates for a prolonged period of time”.

Investing in companies operating in concentrated industries can offer:

  1. Protection in an inflationary environment (more pricing power to protect profit margins)
  2. Exposure to “quality” factors (concentrated industries can act more rationally, allowing for better return on equity)


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