Nearly 40% of S&P 500 Stocks Sit in Bear Market Territory as the Index Holds Near Highs

More than a third of S&P 500 members have fallen at least 20% from their 52-week highs, even as the index holds near record levels.

Estimates of the damage vary by firm and by measurement date. One tally puts 44% of S&P 500 stocks in bear market territory, with nearly a quarter of the index down 30% or more and some names off by over 50%.

JPMorgan goes further, counting 60% of the index's members down 20% from their highs.

A bear market is a 20% drop from a peak, while a 10% drop counts as a correction. Historically these events arrive roughly every six years, carry a median decline of 33%, and a quarter of them happen with no recession attached.

A handful of stocks are carrying the index

Market breadth sits at its weakest point since the dot-com era, according to Goldman Sachs, with more individual stocks hitting 52-week lows even as the index sets new records.

The concentration shows up in the weights. Tech makes up 40% of the S&P 500 but only 16% of the equal-weight version of the index, where every member counts the same.

Equal-weight strategies have now underperformed for nearly four years, per DataTrek.

JPMorgan calls the US market a one-trick pony, pointing to a basket of 42 AI-linked stocks responsible for 67% of the index's returns since early 2024. The dependence extends past stock prices into capital spending and economic growth.

The Kobeissi Letter counts 84% of S&P 500 stocks sitting 10% below their peaks, with 10 stocks driving 70% of the index's gains since its March bottom.

Strategists aren't calling the all-clear

Bank of America's Bull & Bear Indicator has dropped to 7.4, ending the technical sell signal that had been flashing.

The bank's strategists point to uncertainty ahead of the Fed meeting and midterm elections, alongside growing concerns about an AI bubble.

Investors are still pouring money into tech stocks, with inflows reaching record levels even as concerns about AI valuations grow.

The team flags real estate investment trusts and small caps as candidates if yields stabilize, since both tend to benefit when rates stop climbing.

For anyone holding a broad index fund, the headline number has been doing a lot of hiding. A portfolio built on anything other than mega-cap tech has likely felt a very different market this year than the record highs suggest.