The S&P 500 has delivered an extraordinary run between 2023 and 2025, posting a cumulative return of 86%. By comparison, the equal-weighted S&P 500 gained just 43% over the same period. That gap represents the largest divergence between the market-cap-weighted index and its equal-weight counterpart over a three-year span since 1971. The explanation is highly concentrated performance, with just seven stocks accounting for nearly half of last year’s total gains. So far this year, leadership has begun to broaden, with energy, materials, consumer staples, and industrials emerging as top-performing sectors within the S&P 500.
Joining FINTECH.TV to break down these dynamics was Larry Tentarelli, chief technical strategist of the Blue Chip Daily Trend Report, in a discussion with Remy Blaire. Tentarelli focused on market breadth and index-level risk, noting that roughly 61% of S&P 500 stocks are outperforming the index itself so far this year. He also pointed out that the equal-weight ETF is outperforming both the S&P 500 and the NASDAQ-100, signaling a healthy rotation into the other 493 stocks outside the largest names.
According to Tentarelli, this broadening participation reflects improving conditions for cyclical sectors such as industrials and materials, likely driven by market expectations for a prolonged Federal Reserve rate-cutting cycle. He emphasized that markets tend to price in economic conditions three to six months ahead, making sector breakouts a useful forward-looking signal. Energy stocks like ExxonMobil reaching new all-time highs and small-cap industrials breaking out of long-term ranges suggest strengthening economic momentum.
Tentarelli also highlighted the importance of upcoming economic data, particularly payroll reports. As long as major indexes and sectors remain above their 100-day moving averages, the intermediate-term uptrend remains intact.
The conversation then turned to mega-cap growth stocks, where performance has become increasingly uneven. While Alphabet has pushed to new all-time highs, stocks like Microsoft and Meta have fallen below their 200-day moving averages. This divergence points to a more selective market environment, where earnings results will play a decisive role. Tentarelli stressed that Microsoft’s performance is especially important, as it may shape expectations for AI-related software stocks across the market.
On the risk side, Tentarelli urged investors to watch key downside levels, particularly heading into earnings for major names like Apple and Microsoft. Holding the 200-day moving average will be critical in determining whether weakness remains contained or spills over into broader market pressure. While semiconductors and select tech segments continue to show relative strength, the broader Mag 7 remains in a wait-and-see posture.
Overall, the discussion underscored a shifting market landscape in early 2026, where leadership is expanding beyond a handful of mega-cap stocks. With sector rotation underway and earnings season approaching, breadth, technical levels, and macro data will be central in determining whether this rally can sustain itself as the year progresses.