The S&P 500 is experiencing a notable divergence in performance, driven by the dominance of the "Magnificent Seven" tech stocks, including Alphabet and Tesla. This group is outperforming the equal-weight S&P 500 by the widest margin since May 2023, underscoring a concentration risk where a few mega-cap tech companies are propelling the index's gains. The surge in AI chip demand, as predicted by Broadcom, further fuels investor enthusiasm for technology stocks, even those not directly part of the Magnificent Seven.
The cap-weighted S&P 500's slower rise compared to the Magnificent Seven highlights the impact of market capitalization on index performance. Meanwhile, the equal-weight S&P 500's decline of over 2.5% in December suggests a preference for large, established tech companies over smaller constituents. This trading pattern, as noted by Cameron Crise, raises questions about its sustainability, especially amid potential investor concerns over economic factors like lower yields or political uncertainty.
As of 12:36 on December 16, the S&P 500 is trading at 6,075.94, up from its last close of 6,051.09. The index opened at 6,063.79, reaching an intraday high of 6,077.95, reflecting the ongoing influence of mega-cap tech stocks on market dynamics.