There’s a growing sense that the macroeconomic puzzle is beginning to take shape and what it reveals is deeply concerning. While especially

U.S. equity markets

continue to defy gravity, buoyed by fiscal stimulus and technological optimism, the underlying structure of today’s

capitalism

has become increasingly distorted. This distortion is no longer just a theoretical concern, it’s having a tangible impact on our everyday lives, widening the gap between Wall Street and Main Street and fostering political instability.

What we’re witnessing isn’t free-market capitalism in its traditional form. Instead, it resembles a hybrid system of corporate socialism where risk is privatized for small players and socialized for the largest firms. In this regime, the biggest corporations enjoy implicit government backing, while entrepreneurs and small business owners are left to navigate volatility without a safety net.

This shift didn’t happen overnight. It began in earnest during the 2008 financial crisis when governments stepped in to bail out banks and automakers deemed “too big to fail.” That moment marked a turning point. Since then, policies such as quantitative easing and ultra-low interest rates have inflated asset prices and disproportionately rewarded those with the scale and financial engineering capabilities to take advantage. Share buybacks, funded by near-zero interest debt, became a primary growth strategy. The result? In the U.S., a handful of megacorporations now wield outsized influence over markets, policymaking, and even national economies.

This trend isn’t confined to the United States. In Canada, similar dynamics took hold, particularly under the Trudeau government, which implemented tax reforms that many argue disproportionately have an impact on small and medium-sized businesses. Suddenly, family members, often the only source of capital for entrepreneurs starting out, were no longer able to receive dividends on their investments.

Former prime minister Justin Trudeau’s remarks at the time, that “a large percentage of small businesses are actually just ways for wealthier Canadians to save on their taxes” reflect a persistent misunderstanding of the critical role these enterprises play in the economy. The result is a policy environment that currently penalizes risk-taking and capital formation among smaller players, while leaving Canada’s entrenched corporate giants largely untouched.

Meanwhile, Canada’s oligopolistic market structure has only deepened. In telecommunications, the “Big Three” — BCE Inc.’s Bell Canada, Rogers Communications Inc., and Telus Corp. — continue to dominate mobile, internet and television services, limiting consumer choice and keeping prices among the highest in the developed world. In banking, the “Big Five” — Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, and Canadian Imperial Bank of Commerce — control more than 80 per cent of the market, making it difficult for smaller financial institutions to compete. These firms benefit from regulatory protection and economies of scale, further entrenching their market power.

Together, these developments reflect a broader shift away from competitive capitalism toward a system that protects incumbents and penalizes challengers. If Canada and the U.S. are to foster a more dynamic and inclusive economy, they must rethink how they support small businesses and entrepreneurs, starting with tax policy and market access.

The concentration problem

Consider the current state of the S&P 500. As of September 2025,

Nvidia Corp.

alone accounts for about 8.1 per cent of the entire index. That’s one company representing nearly a tenth of what is supposed to be a diversified benchmark of the U.S. economy.

Dig deeper into Nvidia’s latest earnings and the concentration risk becomes even more alarming. In its second quarter filing, Nvidia disclosed that 23 per cent of its US$46.7 billion in quarterly revenue came from a single customer, while another 16 per cent came from a second customer. While Nvidia did not name these customers, analysts initially speculated they were end clients such as

Microsoft Corp.

and

Meta Platforms Inc.

, both of which are major players in the AI space and together represent roughly 10 per cent of the S&P 500. However, Nvidia’s filing clarifies that these “direct customers” are likely firms that purchase chips directly from Nvidia with the end users being hyperscalers and cloud service providers that are indirect customers buying through these intermediaries. It means Nvidia’s revenue is not only highly concentrated among a few buyers, but also obscured by layers of distribution, making it harder to assess the true exposure to specific end clients. This is rather concerning for a company with such a large weighting in the S&P 500.

This means that three companies, Nvidia, Microsoft and Meta, are now likely interlinked and account for nearly 18 per cent of the S&P 500’s market cap and an even larger share of its earnings momentum. That’s not diversification; that’s dependency.

Why this matters for investors

The S&P 500 has long been touted as a diversified index, ideal for passive investors. But the reality is that it has become increasingly top-heavy, with the Top 10 stocks now accounting for more than 35 per cent of the index’s market cap. This level of concentration is the highest in decades, surpassing even the dot-com bubble era.

Such concentration creates systemic risk. If one of these companies stumbles, whether due to regulatory pressure, geopolitical tension or a failed product cycle, the ripple effects could be profound. And because these firms are so interconnected, especially through AI infrastructure and cloud services, the risk is amplified.

Ironically, many investors view these megacap tech stocks as “safe” because of their cash flows, scale, and defensive qualities. But safety in size is a mirage. When the same firms dominate both the supply chain and the index, any disruption becomes a macro event.

There has to be a better path forward

If capitalism is to be revitalized, it must reward risk-taking and decentralized power. That means creating a system where small businesses and entrepreneurs have access to capital and support during downturns, and protection from monopolistic competition.

For example, in Sweden, instead of viewing entrepreneurs as tax cheats they offer incentives and a social safety net to encourage risk taking. This includes universal healthcare, subsidized childcare, parental leave and pension contributions, which are available to self-employed individuals and small-business owners. This reduces the personal risk of starting a business, as entrepreneurs don’t need to rely on employer-provided benefits.

While entrepreneurs in Sweden pay relatively high taxes, they also benefit from deductible social security contributions for sole traders and standard deductions for business-related expenses such as travel, housing and tools. And there is a flat special income tax for non-residents (SINK) of 25 per cent for those working temporarily in Sweden, simplifying compliance.

The case for a capitalism reset

The investment landscape is no longer shaped by the principles of open competition and entrepreneurial dynamism. It is increasingly defined by concentration, protectionism and policy asymmetry. Capitalism, once a system that rewarded risk and innovation, now seems to favour incumbency and scale. The result is a fragile ecosystem where a handful of corporations dominate markets, influence policy and shape economic outcomes, while small businesses and entrepreneurs are left to absorb the shocks.

This trajectory is unsustainable. The U.S. government’s recent move to acquire equity stakes in large public companies, such as its investment in Intel, signals a troubling shift toward deeper entanglement between state and corporate power. Rather than fostering competition and innovation, this approach risks reinforcing monopolistic structures and further crowding out the very entrepreneurs who drive long-term growth.

If we are serious about restoring balance and resilience to our economies and portfolios, we must rethink how capital is allocated, how markets are regulated and how risk-takers are supported. That means building systems that reward innovation, decentralize power and provide meaningful safety nets for those willing to challenge the status quo.

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Investors, policymakers and business leaders must ask themselves: Are we building a future that encourages resilience and creativity or one that entrenches fragility and dependence? The puzzle is coming into focus. Now is the time to act before the next shock exposes just how concentrated and vulnerable the system has become.

Martin Pelletier, CFA, is a senior portfolio manager at Wellington-Altus Private Counsel Inc., operating as TriVest Wealth Counsel, a private client and institutional investment firm specializing in discretionary risk-managed portfolios, investment audit/oversight and advanced tax, estate and wealth planning. The opinions expressed are not necessarily those of Wellington-Altus.

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