There's nothing like a soaring stock market to make a summer break more enjoyable. The S&P 500 index's near-15% return for the first half of the year ranks as the 13th best start since 1950, according to Comerica Wealth Management. Before you break out the confetti, it's notable that the entire universe of stocks did not rise equally over the past six months.
You probably have heard a lot about the generative artificial intelligence stock-market boom, underscored by the rocket-ship performance of chipmaker Nvidia. This one company accounted for almost a third of the S&P's first-half performance. If you add four other companies — Microsoft, Apple, Amazon and Meta, the five contributed about 60% to the S&P 500 from Jan 1 to June 30.
To understand how narrow this performance is, it's helpful to compare the S&P 500 with its sibling, the S&P 500 Equal Weight Index. In that index's calculation, each company of the S&P 500 index is given an equal weight instead of a weight based on the company's market capitalization (the number of shares outstanding multiplied by the price of the stock). With an equal weight, the performance drops to about 4% for the first half of the year.
Of course, had you put all of your eggs in the Nvidia basket, you would have been up by more than 150% this year. All of these numbers are a great reminder that you do not need to feel the pressure to identify the next Nvidia. In fact, the beauty of owning a diversified portfolio of index mutual or exchange-tr.