S&P 500

, often seen as the safest place in the stock market to put money, may be anything but.

The notion that the index is a particularly broad measure of the market has really never been true. The S&P is weighted by market capitalization, so the biggest stocks in the index have always had a lot of pull. But this has not always been the common perception.

In a bull market that has been extraordinarily kind to the S&P, the index keeps on trouncing active fund managers. The index's continued outperformance, coupled with the idea that it is broad, creates an illusion of safety. This is an example of hindsight bias: The S&P was the place to put money for the past five years, so it's where you should put money now.

And if there is any truth to the old eggs-in-baskets saw, it's a considerably more dangerous place these days than it's been in the past. Since 1994, the index has gotten narrower, especially in the past year. Consider that at this time in 1994, the top 50 stocks accounted for 44.9% of the index's capitalization. Last year at this time, they accounted for 49.4%. Now it's 55.8%.

The story here is the substantial gains by the biggest stocks in the S&P. There are a few reasons for this. With trouble in Asia, Russia and so on over the past year, investors who wanted to stay in the stock market have felt safer in the largest and most liquid names. The S&P's success itself is a factor; portfolio managers sick of getting beaten have loaded up on big-cap issues. And then, too, these companies are big dogs for a reason: They're good at what they do.

As these stocks have run higher, valuations have gotten stretched. The trailing price-to-earnings ratio on the S&P 500 is at 29.2 -- about as high as it's ever been. If we were to create an

S&P 10

index (giving the top 10 stocks the same relative weighting that they have in the S&P 500 -- chances are your mutual fund owns this one), its P/E would be 52.1. The S&P 10 represents a fat 21.5% of the whole S&P 500.

Source: Standard & Poor's. Percentage representation as of March 19.

Worried about the increasing narrowness of the market, John Manley, equity strategist at

Salomon Smith Barney

, wrote in a recent report that investors, seeing the outsized returns of the biggest stocks, might be "tempted to abandon diversification and target their portfolios toward an ever-narrowing slice of the equity market. This course of action is imprudent, and clearly dangerous. A portfolio fortunate enough to be driven to excess returns by a narrow focus can be quickly dragged down in the event of a downturn in its constituents." With ever-heavier weightings toward its biggest components, the S&P is beginning to look a lot like that kind of portfolio.

Of course, it is one thing to say the S&P is risky because it relies so heavily on a few stocks with gigantic multiples, and it's another thing to say that it's itching for a fall. While people talk about how dangerous it is to put all your eggs in the same basket, if you're lucky enough to pick the right basket, you make out well.

'These big stocks are going to have problems in their price if they have problems in their fundamentals,' Salomon Smith Barney's John Manley says. 'They won't come down just because they've gone up so much. But if they don't make their numbers, there's going to be hell to pay.'

"These big stocks are going to have problems in their price if they have problems in their fundamentals," says Manley. "They won't come down just because they've gone up so much. But if they don't make their numbers, there's going to be hell to pay."

That, unfortunately, could pose a risk for the rest of the market, says Manley. "The thing to remember is, when you start to see them start to go, they peel off very quickly. Usually this isn't positive for the market."

The problem is that a selloff in the large-caps would not invert the market's recent equation, where the big stocks have outperformed while the rest of the market has suffered, says Richard Dickson, technical analyst at

Scott & Stringfellow

in Richmond, Va.

"If investors reach a point where they want to get out of the Nifty 50 stocks, they're not going to want to get into other stocks," Dickson says. "It changes the attention from 'I want to own equities' to 'I don't want to own equities.' They'll sell them all -- even stocks that are way down, they'll sell them some more."

Cliggott Sees Rotation and Likes It

Yet not everyone is so dour about what trouble in the S&P heavyweights would mean for the rest of the market. Douglas Cliggott, equity strategist at

J.P. Morgan

, is finding solace in the substantial rotation he's seen within the market this year. Several groups that underperformed the S&P last year -- lumber, copper, heavy trucks, oil services, brokers, airlines -- have been outperforming it this year. Some of last year's winners are this year's laggards.

"To me, the real excitement is getting played below the top 25 names or beneath the surface of the S&P because it really seems there's been a pretty tangible shift in the composition of winners and losers," says Cliggott. "I think that's healthy because it suggests that there are portfolio managers that are willing to cut loose stocks whose fundamentals aren't getting better and embrace ones where it looks like they are. This could open up the field for a lot of managers to beat the market."

Cliggott expects weakness in the S&P through the end of the year, but he doesn't think any kind of sharp selloff is in the cards. And he doesn't think weakness is enough to turn people off stocks.

"To me it would be amazing if six or nine months of nothing would cause a big reversal," he says. "Obviously it could happen, but I wouldn't consider it a high-probability outcome."