The divergence marks a notable change in leadership within the market. Year to date, the cap-weighted S&P 500 maintained a positive edge thanks to a small group of technology and communications giants. However, recent sessions show investors favoring sectors such as industrials, consumer staples and regional banks, all of which feature more prominently in the equal-weight index. Many analysts view such broadening as a prerequisite for a durable advance, because it lessens reliance on any single theme or set of companies.
Technical indicators underscore the market’s shifting tone. On 22 April 2025, the S&P 500 recorded a so-called “death cross” when its 50-day simple moving average fell below the 200-day average. The crossover occurred while the index was reacting to tariff-related “sticker shock” that briefly pushed major benchmarks toward near-bear-market territory.
By the third week of June, the 50-day average had climbed back above the 200-day line, confirming a “golden cross.” At that point, the index was already two months into a rebound rally fuelled primarily by enthusiasm for generative AI applications and expectations that policy makers might pause additional interest-rate hikes. The 50-day moving average remained comfortably beneath the spot price of the index through early October, illustrating strong upward momentum.
Momentum eased at the start of the fourth quarter as concerns grew that valuations for the largest AI players had reached unsustainable levels. Simultaneously, questions emerged over the likelihood of further monetary policy easing by the Federal Reserve. Those factors triggered a mild pullback, yet the index never fell below its 50-day support line.
Bargain hunters stepped in quickly, and by the final days of October the S&P 500 pushed to a new all-time closing high near 6,890. While the benchmark has since consolidated, the equal-weight variant has edged higher, reflecting broader buying interest. According to data compiled by S&P Dow Jones Indices, the equal-weight index added roughly one percentage point more than its cap-weighted counterpart over the past month.
Strategists note that increased participation often accompanies sector rotation rather than wholesale selling. Funds raised by trimming positions in high-profile AI names appear to be redistributed into companies exhibiting stable cash flows and less stretched multiples. The resulting effect can mute headline index moves even as a greater share of listed issues advance.
Traders continue to monitor the 50-day simple moving average on the S&P 500 as first-line support. A decisive break below that trend line could invite algorithmic selling, whereas sustained closes above it may encourage further allocation into lagging groups. For now, the index remains fractionally beneath late-October highs, while internal metrics suggest healthier underpinnings than those seen during earlier AI-driven surges.
Outlooks for early 2026 hinge on several unresolved factors: corporate guidance during the upcoming earnings cycle, clarity on tariff policies following recent trade negotiations, and any shift in central-bank language regarding inflation targets. A continuation of the current pattern—flat headline performance coupled with rising participation—would contrast with much of 2025, when gains were concentrated among the largest constituents.
Market participants will receive additional insight when the Federal Open Market Committee releases minutes from its December meeting and when December non-farm payroll data are published early next month. Either event could influence expectations for interest-rate policy, which in turn may determine whether the present broadening trend persists.
Crédito da imagem: Original source
