In a recent commentary, Tim Holland, CFA from Orion Portfolio Solutions issued some important reminders to investors who tend to focus too heavily on the performance of various market indexes. While some people hold these benchmarks to be a kind of "Holy Grail" of portfolio performance, the truth is a bit more complicated. Read his words below. - Jason
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Not All Indexes Are Created Equal…
By Tim Holland, CFA
FEBRUARY 23, 2026
• There is more than one way to build an equity index…you could take a geographical approach (country, region, or world); a style approach (growth or value); a size approach (small, medium, or large); a factor approach (momentum, yield, quality) or a sect stocks you want in your index you must decide how to place them or weight them in your index – market cap, price or equal distribution.
• The most famous index in the world – the S&P 500 – is made up of companies that share certain characteristics – including size and profitability – that are weighted by market cap, meaning the bigger the market cap (which as we know is really just the price of the stock times shares outstanding) the bigger the weight in the index (which is how the Magnificent 7 came to make up about 37% of the S&P 500 at their collective market cap peak). That index, as of February 19th, is up just 0.2% year to date, reflecting a meaningful rotation by investors out of US large cap technology stocks, including the Mag 7 (which still account for about 33% of the index), and into US value and US small cap stocks, which have performed much better of late on an absolute and relative basis.
• We have written why that rotation should prove to be a positive development for the market, as more companies catch a bid and the bull market broadens out, even as US large cap tech stocks stumble (six of the Magnificent 7 stocks are in the red for 2026 with only Nvidia positive, and by less than 1%). To put a finer point on the performance differential between large cap technology stocks and the rest of the market, the S&P 500 Equal Weighted Index is up 6.1% in 2026, outdistancing the better known, and better followed S&P 500 by 5.9% (see chart).
• Markets have been volatile in 2026, while the market’s bellwether index has done a whole lot of nothing, but if you look past the market cap weighted S&P 500 and focus on the equal weighted S&P 500, the performance story brightens considerably.
Source: FactSet, February 19, 202