Friend: “Rob, the stock market keeps making all-time highs.”
Me: “So what?”
I mean no disrespect to my friend, or to anyone else who gets excited about “all-time highs” for the S&P 500 Index ($SPX) or other major market indexes. But those highs mask the broader story. And there’s a very good reason why that’s the case.
Most money today goes into S&P 500 index funds. The S&P 500 is crowded at the top. That means roughly 400-450 of those 500 stocks don’t matter at all. And beyond the top 25-50, most do not matter very much.
For investors in SPY (SPY), VOO (VOO), IVV (IVV), and scores of other ETFs that sound different but act similarly, the headlines are all that matter. Because that’s what they own. Even if those 450 or so stocks falter, it is like that proverbial tree in the forest. Does it make a sound if no one is around to hear it? Of course, the same is true when they rally.
Here are the top 10 (11 shown since Alphabet (GOOG) (GOOGL) is 2 tickers). That’s 40% of the market cap right there. 10 companies.
www.barchart.com
The broad market indexes often paint a picture of relentless growth, but a look under the hood of the S&P 500 reveals a market that is anything but broad based. While the headline index continues to climb, driven by an almost singular obsession with the AI trade and geopolitical headlines, the reality for the average stock in the index is significantly grimmer.
I looked at a watchlist I maintain of S&P 500 stocks. I reviewed individual stock performance over the past 52 weeks. Thanks to some fortunate calendar timing, where last year’s tariff tantrum had just ended and apparently so have Iran War fears, SPY is up 35% since this same time last year.
A few weeks ago, that figure was closer to 10%. Games with numbers, so to speak. But also the type of hype that newer investors are not likely to see through. So there, I said it.
The massive gap here: the AI elite and the rest of the market. If your portfolio feels like it is treading water, or worse, you aren’t alone. You are…
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