I wanted to check in again this month in light of the renewed tensions in the Middle East. Please read below for an update on the health of the stock market. 

Recent weakness in large technology companies has raised concerns about increased market vulnerability. To assess this, it is helpful to compare the performance of three groups of stocks beyond the S&P 500 Index: 

The traditional S&P 500 is weighted so that the largest companies have the most influence on its performance. 

The equal-weight S&P 500 assigns each company similar influence, offering a clearer view of average large-company performance. 

The Russell 2000 tracks smaller U.S. companies. These companies tend to be the most volatile and sensitive to the direction of interest rates. 

Comparing the period before the 2022 downturn with the 2026 market is encouraging.

During the second half of 2021, the traditional S&P 500 gained approximately 12%, while the equal-weight S&P 500 gained about 7%. The Russell 2000, however, declined roughly 2%. 

In other words, the largest companies continued to push the S&P 500 higher, but smaller companies were already struggling. This growing separation suggested that fewer stocks were participating in the market’s advance. Although the major index still appeared healthy on the surface, conditions underneath it were becoming less favorable. 

The pattern in 2026 has been notably different. Through July 21, the traditional S&P 500 was up approximately 10%, the equal-weight S&P 500 was ahead about 12%, and the Russell 2000 had gained roughly 21%. 

Market gains now extend beyond the largest technology companies to include average S&P 500 firms and, notably, smaller stocks. The equal-weight index has risen since mid-May, and measures of advancing stocks across all company sizes have reached new highs. 

This broader participation is important. Recent softness in technology appears to reflect investors moving money into other areas of the market rather than withdrawing money from stocks altogether. The traditional S&P 500 has moved sideways as technology has paused, but the average stock has continued to hold up well. 

No single indicator can guarantee what the market will do next, and normal pullbacks should always be expected. However, the evidence today does not resemble the narrowing market that developed before the 2022 decline.

Instead, we are seeing broader participation, improving performance from smaller companies, and continued strength beneath the surface of the major indexes. Current indicators have not shown the type of meaningful deterioration that would ordinarily support making portfolios more defensive. 

Based on the evidence available today, I do not see a reason to dial down portfolio risk. I believe the appropriate course is to maintain well-diversified allocations designed around your objectives.