Equity markets have set and reset new all-time highs in recent months, but one of the most interesting (and constructive) developments behind this summer’s rally has been its breadth.
As of the end of August, 43% of the stocks that make up the S&P 500 Composite Index1 outperformed the benchmark on a year-to-date basis, up from 31% in 2025, 29% in 2024, and 30% in 2023. By comparison, 59% of constituents outperformed the benchmark during the broad market decline of 2022. More notably, since June 2 (which marked the peak before markets sold off through June and July), the share of constituent stocks outperforming the top-line index has increased to 60%. Market participation has not been this broad in a quarter of a century.
Share of S&P 500 constituents outperforming the S&P 500 Composite Index
(percent)
Broad participation in market gains is typically indicative of a healthier market environment, with more durable momentum than periods when returns are driven by only a small group of stocks.
This trend is also reflected in the performance of the equal-weighted S&P 500 Index2 which has outpaced its more widely followed capitalization-weighted version by 4.5 percentage points since June 2, marking the largest such advantage during an up year since 2010. Year-to-date through August, the equal-weighted index has outperformed by 1.6 percentage points.
These developments are relevant for investors because they highlight the benefits of effective diversification, which remains a key component in preserving and growing wealth over the long-term. For the 20 years ending 2022, the equal-weighted S&P 500 outperformed the capitalization-weighted version by over 1% per annum. Basically, diversification didn’t deliver for three years in the last quarter century.
In contrast, narrow market leadership, such as that experienced over the previous three years, can encourage increasingly concentrated portfolios and leave investors exposed to risks that may not be fully appreciated. Recent months have illustrated this dynamic, as areas that have previously driven market returns have notably lagged. Technology, particularly software, along with Communication Services, Consumer Discretionary, and Utilities, have all declined over the last two months while the other sectors are up and ahead of the S&P 500.
S&P 500 Index component performance since June 2, 2026
(percent, U.S. dollar basis)
There has also been a similar shift internationally. Whereas the past several years have been largely characterized by U.S. market leadership, U.S. equities have broadly lagged their Developed Market peers as investors increasingly seek opportunities abroad.
Regional MSCI3 stock market index since June 2, 2026
(percent, U.S. dollar basis)
The fact that the recent performance has been underpinned by fundamentals, including broadening improvement in economic activity and earnings growth momentum, rather than strictly a shift in investor sentiment suggests there may be further potential for broad-based market gains. This development could prove beneficial for more diversified investment portfolios that have lagged during the highly concentrated market environment of recent years.
A final note on Canadian markets led by commodities, materials and very strong bank stock performance. These areas are specifically what other markets are lacking, making Canada and foreign markets a good long-term diversifier for investors.
1 The S&P 500 is an index of 500 stocks designed to reflect the risk/return characteristics of the large-cap US equity universe.
2 The S&P 500® Equal Weight Index (EWI) is the equal-weight version of the widely used S&P 500. The index includes the same constituents as the capitalization-weighted S&P 500, but each company in the S&P 500 EWI is allocated a fixed weight – or 0.2% of the index total at each quarterly rebalance.
3 The MSCI indexes are free-float weighted equity indexes and are designed to measure the performance of large and mid-cap segments of a given domestic equity market.
Guardian Partners Inc. (“GPI”) is providing, with permission, this market commentary, which was co-authored by Guardian Capital LP (“GCLP”) and GPI. GCLP is an affiliate of GPI, and is both a sub-advisor to certain GPI accounts and the Advisor and Fund Manager to the GCLP investment funds offered to GPI clients.
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Published: September 1, 2026