Below the surface

At the end of Q3 2026, the S&P 500 was trading close to its all-time high. Yet beneath the surface, the picture was very different.

58% of its constituents were more than 20% below their individual peaks, and 40% had fallen by over 30%. Meanwhile, the equal-weighted S&P 500 was down 1.8% year-to-date, compared with a gain of 10.4% for the market-cap-weighted index.

The market has become increasingly dependent on a handful of mega-cap technology stocks, largely driven by the AI theme. This concentration is a clear source of fragility.

But there is another side to the story. Such dispersion also creates opportunities for stock pickers willing to look beneath the surface. After all, a stock trading far below its peak is not necessarily cheap, but it is certainly worth a closer look.

For value investors, the opportunity lies in distinguishing a falling share price from a deteriorating business.