At the end of last month, almost a third of the companies in the S&P 500 were 20% below their 52-week highs. Photo / 123RF

If you’ve only glanced at the S&P 500 index in the US these past few months, you might conclude it’s been a relatively quiet period.

The market is up around 11% this year, just slightly below its all-time high.

Nothing to see here.

Look under the hood, however, and it’sa completely different story.

The market has undergone a major leadership rotation with former market darlings stumbling, new leaders emerging and investors becoming much more selective.

While the S&P 500 index has been relatively steady, the winners and losers beneath the surface have changed dramatically.

One of the surprises has been the Magnificent Seven.

These mega-cap tech companies have carried the market for the past few years and if you didn’t own them, chances are you underperformed.

It’s been a different story of late, and by late July only one of those seven was ahead of the S&P 500 in 2026.

Rather than that derailing the broader market, other sectors simply picked up the baton.

Financials have been among the strongest performers in recent months as investors have become more confident about the economic outlook.

Healthcare has also staged an impressive recovery after a difficult few years, while many industrial companies have continued to benefit from strong infrastructure and capital spending.

Unsurprisingly, energy has enjoyed a resurgence in 2026 amid firmer commodity prices and renewed geopolitical tensions.

Even within the technology space itself things have changed, and investors haven’t been rewarding every company linked to artificial intelligence (AI).

These moves gathered momentum in July, with the Philadelphia Semiconductor index falling 20.6% for its worst month since 2008.

Despite that fall it’s still up almost 60% in 2026, highlighting just how significant the gains were earlier in the year.

Businesses providing “picks and shovels” for the AI boom have also paused after some extraordinary returns, while previously unloved software companies such as Adobe and Salesforce have outperformed.

Perhaps the clearest evidence of this broadening leadership is the performance of the equal-weight S&P 500.

Unlike the traditional S&P 500 index, where the largest companies dominate returns, the equal-weight version gives every stock the same weighting and influence.

It has comfortably outperformed the regular S&P 500 these past few months, as well as year-to-date, confirming that the gains are being shared more broadly now.

These are all healthy developments.

Bull markets are rarely driven by the same handful of companies forever, and we don’t want them to be.

Over time, market leadership broadens as investors find value in different sectors and as improving economic conditions support a wider range of businesses.

What we’re seeing today doesn’t mean the technology or artificial intelligence story is over.

Many of these companies have been reporting exceptionally strong earnings, but investors are no longer prepared to pay any price for this growth.

They’re becoming more discerning about whether companies can maintain the pace of such strong earnings growth.

On the face of it, the S&P 500 index hasn’t changed much at all.

But under the hood, almost everything has.

Mark Lister is investment director at Craigs Investment Partners. The information in this article is provided for information only, is intended to be general in nature, and does not take into account your financial situation, objectives, goals, or risk tolerance. Before making any investment decision, Craigs Investment Partners recommends you contact an investment adviser.