Handful of tech stocks drive diverging measures of S&P 500 performance

By one measure at least, the US stock market has slipped into negative territory since the start of the year. 
The S&P 500 Equal Weight index, which gives equal value to each stock, has fallen 0.35 per cent since January, data from Refinitiv shows. That stands in stark contrast to the 9.5 per cent gain for the benchmark $S&P 500 Index(.SPX.US)$ , where companies with larger market capitalisations account for a larger share of the index.
Although bigger gaps have previously opened up between the two measures of the same stock market’s performance, “there has never been such a strong negative divergence”, said Manfred Hübner, managing director at research house Sentix.
Rapidly rising demand for the very biggest stocks explains the difference. Riding the AI wave, $NVIDIA(NVDA.US)$ , $Microsoft(MSFT.US)$ , $Alphabet-A(GOOGL.US)$ $Alphabet-C(GOOG.US)$ , $Apple(AAPL.US)$ , $Amazon(AMZN.US)$ and $Meta Platforms(META.US)$ have added a total of $3.1tn in market cap terms in 2023, data from AJ Bell show. Ignoring their contribution, the S&P 500 has shed $286bn so far this year.
High quality, low-risk tech stocks may also have begun to trade like traditional haven assets such as US Treasuries and the dollar, “both of which are beset by doubt”, argued Erik Knutzen, chief investment officer multi-asset class at Neuberger Berman. “Perhaps market participants are more concerned than they look,” he said.
Stripping out volatile food and energy prices, core inflation remains stubbornly sticky, suggesting the US Federal Reserve may have to continue raising interest rates or hold them “higher for longer” to engineer a recession in the next 12 months.