Surprising Trends Beneath the S&P 500 So Far in 2026
While the S&P 500 index appeared relatively flat through the end of February 2026, we’ve seen some noticeable stock market volatility.
In this video, Casey looks beneath the surface of the market to examine what’s actually happening within the S&P 500 index.
Data from Bespoke Investment Group shows a wide dispersion in returns among S&P 500 stocks. Many companies have moved significantly higher or lower despite the overall index showing little change.
This dynamic reflects the structure of a cap-weighted index, where a relatively small number of the largest companies carry a significant influence on index performance.
Also historical research shows that while the S&P 500 has averaged roughly 8–10% annual returns over long periods, the market hardly finishes a given year precisely in that range. In the shorter term, market returns often fluctuate widely before arriving at long-term averages.
Finally, we discuss how diversification across different areas of the market has played a role so far this year. Many stocks – outside the largest companies – have outperformed the index itself. Market leadership rotates over time and attempting to consistently “time” sectors or market leadership can be difficult.
Takeaways:
- The S&P 500 has been mostly flat to start 2026, but some individual stocks have moved significantly.
- A relatively small group of large-cap stocks (currently, just 8) heavily influences index performance.
- A large number of companies in the S&P 500 are outperforming the index itself this year.
- Historically, the market rarely finishes the year precisely in (or around) the long-term 8–10% average return.
- Diversification across different parts of the market can help capture shifting leadership.
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Surprising Trends Beneath the S&P 500 So Far in 2026 – Transcript
Today we’re going to look under the hood of some index funds and market dynamics to start the year. And there’s been some volatility to start the year here.
But the overall market — as defined by the S&P 500, in this video, year-to-date has been basically flat.
So we’re going to look at a couple charts. The first chart here is brought to us by Bespoke Investment Group.
As you can see on the chart here, as of February 17th, the S&P 500 was basically flat for the year.
So far, as Bespoke points out, there are 94 stocks out of the 500 that make up the index. There are 94 stocks that were, that are up or down less than 5% per year.
So, 94 out of the 500 aren’t really doing much, on the surface here to start 2026.
But on the flip side of that, there are 117 stocks that are up or down more than 20% this year.
A lot of stocks are moving around a lot.
Speaking to, the volatility that I mentioned at the top.
Two things I want to mention here about these stats.
The S&P 500 is a cap weighted index. Which means the biggest stocks have a heavier weight in the index than smaller stocks do.
Currently the top eight names in the S&P 500, the biggest eight stocks in the S&P 500 make up around 35% of the overall index.
So each index fund, it’s important to, to know that each index fund has its own weighting methodology.
We’re just talking about the S&P 500 here as an example.
There’s so many index indices these days.
There’s so many index funds and everyone just kind of likes to throw a blanket over the term.
But you know, these different funds kind of do things differently. So it’s important to understand that.
The second thing I want to mention about these stats here is the averaging out concept. And how “under – the – hood” things look — a lot more volatile than just, the overall funds performance.
This applies to the broader market as a whole.
One of our favorite stats here is from Ryan Detrick. He went back and looked at the S&P 500 return on an annualized basis.
And it returns, he said, between 8 and 10% per year.
So he went back to 1950 and looked for “how many years on a year to date or per year basis, actually finished in that 8 to 10% range??”
He (Detrick) found that only four times since 1950 — or about 5% of the time has the S&P 500 actually finished between 8 and 10%.
You know, it, it varies from, some years down, 20% — but the last couple years have been up 20%.
It averages out to that 8% percent, 8 to 10% per year.
But the path to get there looks a lot different.
And that is kind of what’s happening in, in the broader market, the S&P 500 overall this year.
You know, a lot of stocks are moving around a lot and experiencing volatility.
But on the surface, it appears pretty calm.
Uh, one more chart for us to look at here.
This one is from Bloomberg.
So this chart shows that 330 stocks in the S&P 500 are actually outperforming the overall index itself on a year to date basis.
Again, this is because the highest weighted stocks are NOT the ones that are outperforming.
(And) because those stocks are weighted so heavily in the S&P 500, the overall index isn’t really feeling that too much.
So what can we take away from this?
It’s that diversification has paid off this year.
Diversification away from the biggest stocks in the market has paid off recently.
It doesn’t mean it will continue to do so!
It doesn’t mean you should, you know, rip up your portfolio or change anything.
But it just goes to show that owning different areas of the market, different areas of the market are going to lead the charge in some years, and then they’re going to, lag in other years.
And, the laggards from the years past are going to be the ones that lead us now. And it’s just going to fluctuate.
And trying to jump in and jump out — and time which areas or sectors of the market are going to outperform and underperform on a yearly basis….
We think it’s a fool’s game. And you’re just going to drive yourself crazy trying to do that consistently over time.
So just wanted to take stock of what’s been happening in the market to start 2026 here.
It allowed us to talk about two really important topics.
The first being average returns and how we can expect “anything but” average on a yearly basis.
The path to get to average returns… isn’t always a smooth straight line.
The second big topic is diversification.
Owning different areas of the market pays off. And trying to, you know, time, what’s going to be outperforming versus underperforming on a yearly basis is, really difficult to do on a consistent basis! And diversification will pay off in the long run.
Thanks as always for watching.
We’ll be back with you with the next one.
