The Equal-Weight S&P Hit a Record While the Nasdaq Fell — Read That Sentence Again

On July 27 the equal-weighted S&P 500 — which strips out market-capitalisation bias — hit a record high while the Dow rose about 1%. The next session the Dow added another 537 points, or 1.03%, to close at 52,747.32, even as semiconductors extended a brutal drawdown. Those facts belong to the same event, and most coverage is reporting half of it.

Money is not leaving the market. It is moving inside it, out of high-profile chipmakers and into more economically sensitive businesses. The headline indices obscure this because the cap-weighted S&P 500 is dominated by the exact names being sold.

When the average stock rises and the index barely moves, the index is telling you about its largest constituents, not about the market.

The damage inside semiconductors

July has been severe for the sector that led the first half. As of July 21, roughly three weeks into the month, the month-to-date declines looked like this:

Stock	July decline (to Jul 21)
SanDisk (SNDK)	around −37%
Marvell (MRVL)	around −34%
Intel (INTC)	around −28%
Micron (MU)	around −23%
Western Digital (WDC)	around −21%

Those figures deepened over the following week as the selling broadened. The context is worth holding onto: the 25 best-performing Russell 1000 stocks of the first half — each up at least 150%, averaging a 235% gain — collectively surrendered about a quarter of their value in under three weeks, and every one of them fell at least 8% in the month.

Individual sessions have been violent in their own right. Corning (GLW) fell 19% on July 28, dropping $27.31 to close at $116.05 — its largest single-day decline since 2002 — after an unscheduled mid-quarter update disclosed a slowdown in wireless carrier capital spending. The optical supply chain followed: Coherent (COHR) fell about 11%, Applied Optoelectronics about 10%, Lumentum about 9%.

What was working instead

The buying side of the rotation is the useful part.

Sherwin-Williams (SHW) jumped after posting adjusted earnings of $3.70 per share on $6.79 billion of revenue and raising several full-year targets. Royal Caribbean (RCL) rose after beating on both lines — adjusted EPS of $4.21 against $3.98 expected, revenue of $4.83 billion — and lifting full-year earnings guidance to $17.73–$17.87 from $17.10–$17.50. Falling oil helped the whole cyclical complex, with Brent down 3.9% on July 28.

Paint and cruise ships. That is not a defensive flight to safety. It is capital moving from AI infrastructure into businesses whose earnings are already visible.

Why this is under-covered

Two reasons. First, financial media covers indices, and cap-weighted indices are structurally blind to breadth. Second, “rotation” is a less compelling headline than “selloff,” despite being the more accurate and far more actionable description.

The distinction matters enormously for how you respond. In a selloff, correlations rise and diversification stops working. In a rotation, the losses in one sector are being funded by gains in another — which means an equal-weight or value-tilted allocation is protecting you while a cap-weighted index fund is not.

What Canadian investors should check

If your US exposure is a single S&P 500 index fund, you are more concentrated in mega-cap technology than you likely intend. The equal-weight version of the same index setting records while your holding stagnates is the clearest possible evidence of that.

1. Look up your fund’s top ten weights. If they total more than a third of the fund, you own a concentrated portfolio regardless of how many tickers are inside it.
2. Compare cap-weighted and equal-weight returns year to date. The gap is your concentration exposure, quantified. You can run the two side by side in the stock comparison tool.
3. Add up your real technology weight across every fund you own. US tech ETFs, broad S&P 500 funds and global semiconductor funds are frequently the same bet three times with three sets of fees. The portfolio tracker will total it for you.
4. Consider account placement. US-domiciled equity ETFs held in an RRSP are exempt from the 15% US withholding tax on dividends under the Canada–US treaty. The same fund in a TFSA is not.

Canadians should also note that this is not only a US phenomenon. The TSX has its own version running in the opposite direction, where banks now exceed 25% of the index and account for nearly all of the 2026 gain.

Frequently asked questions

What is the equal-weighted S&P 500?
The same 500 companies, each held at roughly 0.2% of the fund rather than in proportion to market capitalisation. It is effectively an index of the average large US company.

Does a semiconductor decline mean AI is over?
It means expectations for AI capital spending are being repriced. This selloff has specific catalysts — Chinese memory competition, scrutiny of circular vendor financing, and carrier capex slowdowns — rather than a broad verdict on the technology.

Is a rotation bullish or bearish?
Broadening participation is generally regarded as a healthier market structure than gains concentrated in a handful of names. It is deeply uncomfortable for anyone positioned entirely in the names being rotated out of.

Bottom line

The average American stock is doing fine. The largest ones are not. If your portfolio only tracks the second group, the index level is telling you very little about the market you actually own.