The S&P 500 lagged its equally weighted counterpart by 350 basis points last week as mega-cap momentum names drove one of the sharpest factor drawdowns in over two decades — the fourth worst in 22 years. The selloff was concentrated in the Magnificent Seven and similar high-momentum holdings, while the broader market held up comparatively well. Early this week, major US indices opened sharply higher, suggesting stabilization or a potential rotation rather than a full market breakdown.
If you hold a cap-weighted S&P 500 index fund like SPY or QQQ, your portfolio is heavily exposed to the handful of mega-caps that just took the hardest hit — meaning recent pain was concentrated where most passive investors are overweight. The flip side: equally weighted funds like RSP and value-tilted or small-cap positions are suddenly outperforming, signaling a potential rotation that could reward diversification. Analysts at BNY Wealth are targeting S&P 500 at 8,000 on broadening earnings growth, which would mean the rally's next leg is wider and less dependent on a few giant names.
Next major CPI inflation report (~mid-July). Q2 earnings season kicks off mid-July with major bank reports. Next FOMC meeting: July 29-30.
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