Passive investment flows are helping the S&P 500 hold up amid wider share losses, according to 新火集团 chief economist 付鹏.
The benchmark advanced 0.41% to 7,690.73 on Oct. 19, as EconoTimes reported in its coverage of the session. Most U.S. stocks outside artificial intelligence and technology declined that day, The Associated Press reported. The split shows why an index gain may give an incomplete picture of the broader market.
The benchmark’s design helps explain the difference. Under S&P Dow Jones Indices’ methodology, the market value of shares available for public trading determines each company’s weight. A percentage move by a larger member therefore changes the index more than the same percentage move by a smaller one.
付鹏 said weakness beyond the largest stocks has been sharper; he sees passive flows and investors’ concentration in big companies as part of the explanation. With the largest companies carrying more weight, their gains can offset declines elsewhere in the benchmark.
J.P. Morgan’s Oct. 8 analysis offers a longer view: 42 stocks tied to artificial intelligence generated most of the S&P 500’s price gains since January 2024. Michael Cembalest, chairman of market and investment strategy for J.P. Morgan Asset & Wealth Management, said about 30% of index members outperformed the benchmark over the trailing three years, as noted in our earlier coverage of the analysis.
付鹏 is watching market breadth, which measures how widely stocks participate in a market move. He described it as nearing a critical point. If breadth reaches that point, he said, volatility could increase rapidly.
