Stock market returns are broadening out
Technology stocks’ stranglehold on U.S. markets appears to be easing—a welcome development for
stockpickers and diversified investors.
Soaring shares of AI and other tech companies have fueled strong stock gains in recent years, while other
sectors have languished. But recently, some of those laggards have kicked into gear while high-flying tech
stocks take a breather.
For example, the S&P 500 Equal Weight index is off to its best relative start to a calendar year since
1992¹—outpacing the more commonly known S&P 500 index by 4.2%², as seen in the chart. Unlike the
market-cap-weighted S&P 500, which is driven primarily by its largest companies, the S&P 500 Equal Weight index assigns equal weight to all 500 stocks.
Bottom line: Stock market returns are expanding from a “tech-only” party to include sectors such as materials, consumer staples, and energy stocks – all of which are up in 2026.
We see this as a very healthy sign for market strength, which we expect to continue due to factors such as:
● Earnings: Corporate profit growth is broadening out, helping to support more segments of the
stock market.
● Economy: Economic growth has been booming, with real gross domestic product increasing at
an annual rate of 4.4% in the third quarter of 2025. Currently, the Atlanta Fed’s GDPNow model
projects 4.2% growth in gross domestic product (GDP) for the fourth quarter of 2025.
● Policy: Fiscal stimulus, such as federal tax cuts, should support spending and growth, while
monetary policy is becoming less of a driver of overall growth.
Going forward, continued improvements in market breadth should reward diversified portfolios with
exposure to the S&P 500’s many sectors and industries. Additionally, active managers and stockpickers
looking beyond the major indices will have more opportunities to identify value and capture returns.
All of that likely spells good news for goals-based investors who remain well-diversified and flexible in the
coming months.
¹ YTD return through February 6 for each year listed
² YTD return through 02/06/2026
Originally posted on February 11.
S&P 500 is a stock market index tracking the stock performance of 500 leading companies listed on stock exchanges in the United States. The S&P 500® Equal Weight Index (EWI) is the equal-weight version of the widely-used S&P 500. The index includes the same constituents as the capitalization weighted S&P 500, but each company in the S&P 500 EWI is allocated a fixed weight – or 0.2% of the index total at each quarterly rebalance. References to indices, or other measures of relative market performance over a specified period of time are provided for informational purposes only. Reference to an index does not imply that any account will achieve returns, volatility or other results similar to that index. The composition of an index may not reflect the manner in which a portfolio is constructed in relation to expected or achieved returns, portfolio guidelines, restrictions, sectors, correlations, concentrations, volatility or tracking error targets, all of which are subject to change. It is not possible to invest directly in an index. Information obtained from third party sources is believed reliable but has not been vetted by the firm or its personnel.
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