Spinning Wheel: What Goes Up…

Major U.S. equity indexes have delivered calm-looking gains while intense dispersion and rotation have made individual-stock outcomes far more uneven.

• Through October, the S&P 500 gained 11% with a maximum drawdown of 9%, while its average member suffered a 27% drawdown; the Nasdaq showed an even wider gap at 13% versus 48%.
• Three-month correlations among S&P 500 members fell close to zero, near their lowest level since 2011, after reaching above 0.9 during the 2011 debt ceiling and eurozone crisis and above 0.8 during the 2020 pandemic crash.
• Market breadth swung sharply in 2026, with the share of S&P 500 stocks outperforming over the prior month moving from 17% to about 70% by the end of October, after readings near 15% in spring and 67% in summer.
• In October, the S&P 500 fell nearly 1% even though eight of its 11 sectors rose at least 3.9%; Energy led in five of the prior 12 months, while Technology and Communication Services repeatedly shifted between the top and bottom of the rankings.
• Third-quarter 2026 S&P 500 earnings growth estimates rose to 31.6% from 27.6% on July 1, while full-year estimates increased to 36.1% from 26.6%; profitable Russell 2000 companies gained more than 20% year to date versus 3% for non-profitable companies.

Takeaway: Investors face a stock-picking market in which low correlations and unstable sector leadership create opportunity for security selection, while index-level stability can conceal severe drawdowns in individual holdings and GDP growth is showing similar dispersion, with technology and net exports near record contributions and the economy expanding 3.4%.