Despite a global trade war, stubbornly high inflation, rising interest rates, concerns about the global economy, a war in the Middle East, and high energy prices, the S&P 500 is having a great year. In fact, it’s at record levels.
The S&P 500 Hit Record Levels
The S&P 500 last hit a record high of 7844.52 on October 6. It was the 28th time that the S&P 500 hit a record high, at least so far, in 2026. That put the index up approximately 14% year-to-date, which is far better than the 10.5% average annual gains since its introduction in 1957. And the S&P 500 continues to trade near that level.
The S&P 500 is doing better than most on Wall Street predicted it would. Analysts were bullish on the index heading into 2026, with Deutsche Bank being the most bullish, projecting the index to finish 2026 at 8,000. Britain’s HSBC saw the S&P 500 closing out 2026 at 7,500, with strength coming from AI.
There’s still more than two months left in the year, and a lot can happen. Still, the S&P 500’s record-setting pace continues the solid run the index has posted over the last number of years. In 2025, the S&P 500 rallied 16.4%, increased an impressive 23.3% in 2024, and advanced an even bigger 24.2% in 2023.
There’s more to those numbers than meets the eye, though. As the saying goes, you can’t always judge a book by its cover. And this includes the S&P 500. The S&P 500 may be trading at record levels, but most investors aren’t seeing these kinds of big gains in their portfolios.
How Is the S&P 500 Weighted?
The S&P 500 is a stock market index that tracks the performance of approximately 500 large-cap stocks that trade in the U.S. Not all stocks are created equal, though. The S&P 500’s broader performance is based on market capitalization. The bigger the company, the more weight it carries on the performance of the index.
Unfortunately, this leads to a top-heavy concentration of huge AI and technology stocks having the biggest influence. If the biggest stocks on the S&P 500 are doing well, so is the index. But if they take a hit, the entire index will follow suit. The smallest company listed by market cap will have little to no effect on the broader performance.
And that’s kind of what’s going on right now with the S&P 500. The S&P 500 may be trading at record highs, but four in 10 stocks in the index are lower year-to-date. For example, Micron Technology, Inc.’s stock is up 225% in 2026 and 396% over the past year. The median stock market gains for the whole index, though, are just 4%. On top of that, more than 200 stocks listed on the S&P 500 are down in 2026, with 25% of those down more than 11%.
According to Morgan Stanley, just over half of Russell 3000 companies are down at least 20% from their June highs. Roughly 30% have lost more than 30% of their value, and 7% have fallen by more than 50%. The Russell 3000 is an important, broader index to keep an eye on because it tracks 3,000 of the largest companies listed in the U.S.
Why the disconnect? Higher interest rates and capital costs are hurting smaller businesses. Hit by big share price losses, investors are being forced to pivot to stronger-performing sectors like energy and AI.
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