Editor’s Note: The S&P 500 is within a half-point of a record while the equal-weight version of that same index sits 4.6% below its high. In today’s piece, Robert Rapier explains the gap — and why a portfolio built around utilities, dividend stocks, and real assets may be doing exactly what it was designed to do. See the two portfolios he builds for income, safety, and real growth together →

If you have looked at the major market indexes recently, you might conclude that stocks are doing extremely well. The S&P 500 has been trading close to its record high, while the Nasdaq has recently pushed into record territory. Yet many investors looking at their own portfolios may be wondering why they aren’t experiencing anything close to those gains.

There is a simple explanation. When we say “the market” is near a record, we are usually talking about a market-capitalization-weighted index such as the S&P 500. That means the largest companies have far more influence on the index than the smallest ones. But what that really means is some of the biggest stocks in the market have been dramatically outperforming much of everything else.

A Few Giants Can Move the Entire Index

The S&P 500 contains about 500 of America’s largest publicly traded companies, but they don’t each count equally. A company’s weight in the index is determined primarily by its market capitalization. Nvidia, Apple and Microsoft therefore have vastly more influence on the S&P 500 than a company near the bottom of the index.

As of August 31, the 10 largest companies represented 37.8% of the entire S&P 500. The single largest constituent accounted for 8.1%. In other words, roughly 2% of the companies in the index controlled nearly 38% of its movement.

There is nothing inherently wrong with that. The S&P 500 is designed to reflect the market value of large U.S. companies, and capitalization weighting has worked extremely well for investors over long periods. But investors need to understand what the index is actually telling them. A strong S&P 500 does not necessarily mean that most stocks are rising strongly.

That has become particularly apparent in the latest rally. Last week, the S&P 500 was within about half a percentage point of a record high. At the same time, the equal-weight version of the index remained about 4.6% below its record, while the Russell 2000 index of smaller companies was still roughly 6.6% below its high.

The equal-weight S&P 500 contains essentially the same stocks as the regular S&P 500 but gives each company approximately the same influence at each quarterly rebalancing. If Nvidia rises 5% while a much smaller S&P 500 constituent falls 5%, those moves roughly cancel each other in the equal-weight index. In the regular S&P 500, Nvidia’s move has vastly more impact.

That makes the equal-weight index a useful way to ask a different question: How is the typical large U.S. stock doing?

The Difference Is Market Breadth

Investors use the term “market breadth” to describe how widely gains or losses are distributed across the market. A market in which hundreds of stocks are advancing together has broad participation. A market being pulled higher by a relatively small group of very large companies has narrower breadth.

Some of the recent breadth measures have been striking. On one trading day this week, 90 stocks on the New York Stock Exchange hit new 52-week lows while only 22 reached new highs. On the Nasdaq, 139 stocks hit new lows compared with 101 new highs. Even within the S&P 500, 26 stocks touched new lows while only five reached new highs, despite the index itself sitting less than 1% below its record.

That doesn’t mean the market is necessarily about to fall. Breadth can narrow for long periods while the major indexes continue climbing, especially when the companies leading the market are producing strong earnings growth. It also isn’t accurate to claim that only a handful of stocks have participated in the entire 2026 advance. The equal-weight index had performed quite well earlier in the year.

Rather, the important point is that the most recent move toward record territory has again become much more dependent on the largest technology and AI-related companies. That means the headline indexes can look stronger than the experience of many investors who hold a more diversified mix of stocks.

The Relationship to Your Portfolio

Suppose you own 25 stocks spread across utilities, energy, health care, financials, consumer staples and industrials. You may have a well-diversified portfolio of profitable companies yet still trail the S&P 500 during a period when a handful of trillion-dollar technology companies are driving the index.

That doesn’t automatically mean you have constructed a bad portfolio.

It may simply mean that your portfolio is designed differently from the benchmark against which you are comparing it. An income-oriented investor, for example, probably shouldn’t expect a portfolio emphasizing utilities, pipelines, REITs and dividend stocks to perfectly track an index increasingly influenced by giant technology companies. Those holdings have different risk characteristics, different income profiles and often respond differently to interest rates and economic conditions.

The same issue works in reverse. Investors who simply own an S&P 500 index fund may believe they have a broadly diversified portfolio because they own roughly 500 companies. Technically they do. But with the top 10 positions accounting for nearly 38% of the index, they also have substantial exposure to a relatively small group of mega-cap companies.

That concentration has been rewarding while those companies have led the market. It also means their future performance will have an unusually large influence on index returns.

Don’t Chase the Index

This is where investors can get themselves into trouble. When the S&P 500 repeatedly makes headlines for approaching record highs while their own portfolios lag, the temptation is to sell whatever isn’t working and pile into the stocks that have already produced the largest gains.

Sometimes that works. Sometimes it means buying yesterday’s winners at elevated valuations just before leadership changes.

Market leadership has always rotated. Technology dominates for a period, then energy may outperform. Large caps lead, followed eventually by small caps. Growth stocks can dominate for years before value comes back into favor. Investors who constantly rebuild their portfolios around whichever category has performed best recently often end up buying after much of the move has already occurred.

A better approach is to understand why your portfolio is behaving differently. If your holdings are producing the earnings, cash flow and dividends you expected when you bought them, short-term underperformance versus a concentrated index isn’t necessarily a reason to abandon the strategy. On the other hand, persistent underperformance caused by deteriorating businesses deserves a very different response.

The Big Picture

The S&P 500 remains one of the best gauges we have of the value of large American companies. But no single index can tell the entire story of the stock market.

Right now, the S&P 500 is telling us that America’s largest companies—particularly some of its biggest technology companies—are performing very well. Other measures are telling us that the strength beneath the surface is considerably more uneven. The equal-weight S&P 500 remains farther from its record, small caps have lagged, and recent new-high/new-low data show substantial weakness among individual stocks.

So, if you hear that “the market” is near an all-time high and then look at your portfolio and wonder what you are missing, the answer may be nothing. The S&P 500 isn’t lying. But at the moment, it isn’t telling you the whole story either.

If the idea resonates — that a portfolio built around utilities, pipelines, and dividend-paying infrastructure isn’t broken just because it doesn’t move with a tech-dominated index — I’d invite you to take a closer look at the portfolios I’ve built inside Utility Forecaster. My Income Portfolio holds essential-service companies across two actively managed sleeves: last year it returned 10.7% with a 4.8% yield and less than half the market’s volatility. My Growth Portfolio returned 16.5%. These aren’t S&P 500 substitutes. They’re built to pay you in any economy — including one where a handful of mega-cap names carry the headlines. See the current Utility Forecaster holdings and Best Buys list →