S&P500's Narrow Leadership: 1 Year Post Trump Re-Election Analysis

: This analysis provides information gathering and market context to support decision-making. It is NOT investment advice, trading recommendations, or financial guidance. The goal is to present factual information, market context, and risk identification to help users make informed decisions.

On November 17, 2025, Seeking Alpha published an article titled “S&P 500 Tale Of The Tape: 1 Year Since Trump’s 2024 Election, A Deceiving Stock Market” [1]. The article highlights that the S&P500’s strong performance over the past year has been driven by an extremely narrow set of top stocks, creating a “deceiving” market where index returns do not reflect broader constituent company performance. The author recommends a long-with-hedges strategy instead of directional index bets [1].

The event underscores critical concentration risk in the S&P500:

• Misleading Index Performance
  : Cap-weighted S&P500 (^GSPC) rose ~14.19% year-over-year, while equal-weighted (^SPXEW) gained only ~3.53% [0], a 10.66pp gap confirming narrow leadership.
• Investor Perception Risk
  : Cap-weighted ETF holders (e.g., SPY) may overestimate market health as most stocks lag.
• Sector Disparity
  : Communication Services (+39.7% [3]) and tech led gains, while Health Care (+1.1% [3]) lagged significantly.

• Index Returns
  : ^GSPC (+14.19%), ^SPXEW (+3.53%) [0].
• Top Stock Concentration
  : NVDA (7.64%), AAPL (6.57%), MSFT (6.09%)—top three account for ~20% of index weight [2].
• Sector Returns
  : Communication Services (+39.7%), Health Care (+1.1%) [3].

##4. Affected Instruments

• ETFs
  : SPY (cap-weighted), RSP (equal-weighted), QQQ (tech-heavy), XLK (tech), XLV (healthcare), XLU (utilities), XLB (materials).
• Stocks
  : NVDA, AAPL, MSFT (top contributors).

##5. Context for Decision-Makers

• Sustainability of narrow leadership.
• Outlook for top stocks (NVDA, AAPL, MSFT).
• Catalysts for sector rotation to lagging areas.

• ^GSPC vs ^SPXEW gap narrowing (broader participation signal).
• Volatility in top stocks (risk to index).
• Lagging sector performance improvements.

##6. Risk Considerations

• Concentration Risk
  : Index vulnerability to top stock declines (e.g., a 10% NVDA drop subtracts ~0.76% from the index).
• Misleading Returns
  : Investors relying on cap-weighted indices may face unexpected losses if concentration risk materializes.
• Hedging Need
  : Hedges (options, inverse ETFs) can mitigate concentration risk for cap-weighted fund holders.