Key Points
-
The S&P 500 just saw a performance divergence within the index it hasn't seen since the tech bubble.
-
Megacap tech is back in control. History says that could remain the case for a while longer.
-
Here are some ideas for what you could do with your portfolio today.
If you look at what the S&P 500( ^GSPC +0.58%) did in September, you might not think anything unusual happened. The index was down only 0.5% and traded in a relatively tight range. Volatility was mostly in check.
But look under the surface, and you'll see a more disturbing trend.
Consider these numbers for September:
- 78% of the S&P 500 stocks fell.
- 60% of them fell by at least 5%.
- 27% of them fell by at least 10%.
That's far from an uneventful market. The damage showed up in the S&P 500 Equal Weight index's return, which fell by more than 4% during the month.
History says that divergences like this usually reverse, but the timing is very unclear.
Image source: Getty Images.
We've seen this before from U.S. stocks
Narrow megacap tech leadership was evident throughout most of 2023 to 2025. The artificial intelligence (AI) boom benefited the largest companies, which were the first and biggest spenders, and we saw the continued emergence of the " Magnificent Seven" stocks.
This year, however, the trend started to reverse. The market rally broadened considerably, with defensive, value, and small-cap stocks significantly outperforming the S&P 500. But now that the Fed is raising rates, the war in Iran has no end in sight, and inflation remains stubbornly above 3%, investors are returning once again to the familiar, comfortable, high-quality megacap tech names.
Throughout history, there have been multiple stretches where large caps lead for several years before the trend reverses and equal-weight indexes outperform for several years.
The best example might be around the tech bubble. The S&P 500 outperformed the S&P 500 Equal Weight index for roughly five years before the bubble burst. Following that, equal weight outperformed pretty consistently from 2000 through the beginning of the financial crisis seven years later.
Equal weight might be overdue for its turn again.
NYSEMKT: VOO
Vanguard S&P 500 ETF
(0.55%) $3.88
Current Price
$716.20
VOO
YTD1w1m3m6m1y5y
PriceVS S&P
Key Data Points
AUM
$1.8T
Dividend Yield
1.04%
Expense Ratio
0.03%
Top Holdings
NVDA
8.09%
AAPL
7.04%
MSFT
5.70%
September's performance isn't a sell signal
Because narrow leadership can last for a while, September's performance is a sign that they should rotate out of S&P 500 products like the Vanguard S&P 500 ETF( VOO +0.55%). But they shouldn't ignore what equal weight's historic underperformance is saying either.
Back in 2000, it ultimately signaled that the megacap rally had moved too far, too fast and needed to normalize. But that was also a heavily valuation-driven collapse. Today's market is much more fundamentally supported. The AI capital expenditure (capex) boom could support additional revenue and earnings growth for some time.
Plus, investors don't want to be making major portfolio changes based on a single month. The Vanguard S&P 500 ETF is a great long-term core holding. But something like the Invesco S&P 500 Equal Weight ETF( RSP +0.57%) provides an alternative for those wanting to own that same large-cap universe while de-emphasizing some of the megacap currently dominating the index.
If history repeats, adding some equal weight before market leadership eventually broadens again could be a sensible path for buy-low investors.
Could S&P 500 Index help you build long-term wealth?
Before you buy shares in the S&P 500 Index, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and the S&P 500 Index wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $364,023! Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,467,933!
Now, it’s worth noting Stock Advisor’s total average return is 948% — a market-crushing outperformance compared to 214% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
_ *Stock Advisor returns as of October 7, 2026._
Read Next
Oct 7, 2026•By Sean Williams
History Says There Are $8.44 Trillion Reasons the Trump Bull Market Is Running on Borrowed Time
Oct 6, 2026•By Will Ebiefung
If a Stock Market Crash Is Coming, Warren Buffett Says Investors Should Make This Important Move
Oct 6, 2026•By Emma Newbery
Stock Market Midday, Oct. 6: S&P 500 Sets New High, Nuclear Stocks Surge
Oct 6, 2026•By David Jagielski, CPA
Prediction: This Is Where the S&P 500 Will Finish 2026
Oct 6, 2026•By David Jagielski, CPA
Oct 6, 2026•By Bram Berkowitz
Learn 7 ways to generate income with a $1,000,000+ portfolio
If you’ve saved over $1,000,000, this guide is for you. The last thing you want in retirement is to run out of money—you want your money to generate lasting income while you enjoy your life.
Now you can learn the strategies wealthy retirees use to fund their retirement with The Definitive Guide to Retirement Income from Fisher Investments.
Since 1979, Fisher Investments has helped tens of thousands of investors retire comfortably. With over $441 billion under management, they provide tailored money management to help investors like you achieve your long-term goals.1 Download the guide today!
Get your guide›
Fisherinvestments.comGet Financial Insights Relevant to You
Sponsored Content
1As of 6/30/2026.
Stocks Mentioned
\n\nS&P 500 Index\n\nSNPINDEX: ^GSPC\n\n$7,818.93\n\n(+0.58%)+$44.98
Motley Fool Stock Advisor’s Latest Pick
---% Avg Return
Motley Fool Stock Advisor's Latest Pick
948% Avg Return
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
Ad
Double cash back offer for Customized Cash Rewards
The Bank of America® Customized Cash Rewards credit card earns 6% cash back in your choice category for the first year — double the rewards! Plus, earn a $200 online cash rewards bonus after qualifying purchases.
On Bank of America's Secure Website.
Premium Investing Services
Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.
