5 Surprising Facts about the S&P 500 and Magnificent Seven in a Deceptive Year
I’m making some defensive moves after one of the best days of the year for small caps.
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I’m using the early market strength to take some profits and make some adjustments to position sizes. I’m not negative about the market, but it has been a very good run, and I want to protect profits and not give too much back when a turn does occur.
One of the key tenets of my trading is to try to keep accounts as close to highs as possible. That allows for the tremendous power of compounding and negates the unproductive work of making up losses. The closer you are to highs, the more likely you are to continue to produce outperformance. It isn’t an easy task, and it can lead to premature selling, but, as the old saying goes, "you can’t go broke taking a profit."
Overall market action is still very good, with breadth close to four-to-one positive again. The indices have pulled back a little after the strong open, and we’ll see if that invites some profit taking or will attract dip buyers that missed out on Tuesday.
The bearish market narrative is that the stocks are widely overbought and that most of the performance is due to the strength in the mega-cap Magnificent Seven. There is a lot of concern about how much of the total market capitalization is tied up in the Magnificent Seven. Nvidia NVDA is not only setting a record for market cap but also for its weight in the indices.
The truth about the market is quite different than what many investors believe. Here are five key facts that may impact the way you view the market:
1. The Magnificent Seven stocks are underperforming the S&P 500 year-to-date. In 2024, the Magnificent Seven were the main driving force, but in 2025, the return for the group is around 6% depending on whether we use market cap versus equal weight. The S&P 500 has a return of 8.4% and has been dragged down by Apple AAPL and Tesla TSLA.
2. The best performing Magnificent Seven stock in 2025 is Meta META, but there are 47 other stocks in the S&P 500 that have outperformed it. The best performing stock in the S&P 500 is Palantir PLTR with a return of more than 100%. GE Vernova GEV is the second best.
3. Two-hundred-and-nineteen stocks in the S&P 500 have a negative return as of August 12. Despite the talk about the frothy action and the constant new 12-month highs for the indices, 43% of stocks don’t have a gain at all.
4. If all stocks in the S&P 500 are weighed equally, the return is 5.4% versus a capitalization-weighted return of 8.4%. This illustrates that larger-cap stocks have done better than smaller ones, but the bigger-cap stocks that have carried the market are not the most well-known names.
5. The Russell 2000 small-cap index IWM is down about 0.5% year to date, excluding dividends. This is the fifth consecutive year that the Russell has lagged the S&P 500. In two of those years, the spread was over 10%.
The main reason that there is so much talk about the market being frothy and overbought is that the recovery from the Liberation Day tariff scare has been so great. There was a very sharp selloff on that news but an even sharper recovery. However, the indices still have relatively mild gains year to date.
At the time of publication, DePorre had no positions in any securities mentioned.
