2 speeds

Something interesting is happening beneath the surface of the US equity market.

The correlation between the traditional S&P 500 and its equally weighted counterpart has fallen to just 0.38, the lowest level in more than 35 years. Not even during the dot-com bubble did the two indices diverge so dramatically.

And the performance numbers tell an equally interesting story. Year-to-date, the equally weighted S&P 500 (SPW) has gained 16.1%, compared with 11.3% for the traditional S&P 500 (SPX). An outperformance of 4.8 percentage points. Both figures are based on price indices, excluding dividends.

For years, a handful of mega-cap technology companies have dominated index performance. In 2026, however, the broader market is doing better than the headline index suggests.

This is a welcome development. Markets where performance is driven by a narrow group of companies are neither particularly healthy nor necessarily well diversified.

For us as active investors, increasing dispersion creates opportunities. It brings the focus back to individual businesses, their earnings power and, above all, the price we pay for them.

Diversification is not about how many stocks you own. It is about what you own, and at what price.