How you can take advantage of two stock-market trends

MW How you can take advantage of two stock-market trends

By Philip van Doorn

Also in Weekend Reads: Reactions to the Supreme Court ruling against Trump's tariffs, AI and your taxes, and a deeper look into business-development companies

The S&P 500 index is weighted by market capitalization. So far this year, an equal-weighted indexing approach has outperformed the index itself. This type of action has been unusual over recent decades and has preceded important shifts in the stock market.

Like most broad stock-market indexes, the S&P 500 is weighted by market capitalization. Success is rewarded. Stocks of large companies that have performed well tend to make up a large portion of the index.

So you may not be surprised that three companies - Nvidia (NVDA), Apple $(AAPL)$ and Microsoft $(MSFT)$ - make up 19.4% of State Street SPDR S&P 500 ETF Trust SPY, which tracks the S&P 500 SPX by holding all of its stocks.

Over the past five years through Thursday, SPY has returned 87.7%, while the Invesco S&P 500 Equal Weight ETF RSP has returned 63.9%. The long bull market has been led by the largest U.S. tech companies.

But as you can see on the chart above, the equal-weighted S&P 500 has outperformed the cap-weighted S&P 500 so far during 2026. This type of divergence for the two indexing approaches has been rare over recent decades. (All investment returns in this article include reinvested dividends.)

Isabel Wang spoke with professional investors who explained what this shift might mean for the health of the U.S. stock market and what may lie ahead.

Coming up: Prediction-market ETFs may open the door to all sorts of Wall Street tomfoolery

We might still be in the early phase of another broad market shift

This might be an excellent time for U.S. investors to think globally.

Last year, the MSCI World ex USA Index of 23 developed economies returned 22.3%, outperforming the S&P 500, which returned 17.9%. The MSCI Emerging Markets Index of 24 developing economies fared even better, returning 32.1% for 2025.

This year has followed suit, so far, with the MSCI Emerging Markets Index up 11.2% through Thursday, while the MSCI World ex USA Index has returned 6.9% and the S&P 500 has returned 0.4%.

Examples of funds tracking international indexes are the iShares MSCI World ETF URTH, which covers 23 developed economies including the U.S., the iShares Core MSCI International Developed Markets ETF IDEV, which excludes the U.S., and the Avantis Emerging Markets Equity ETF AVEM, which tracks a modified version of the MSCI Emerging Markets Index.

Joseph Adinolfi explained why we might still be still be in an early phase of a movement of investor money to non-U.S. markets.

From the Need to Know column: Why a 40-year Wall Street veteran is telling clients to sell everything American

Trouble (and maybe opportunity) in BDC land

Business development companies have had a difficult 2026 so far. The trend was magnified on Thursday when Blue Owl $(OWL)$ restricted redemptions on the privately held Blue Owl Capital Corp. II.

Here is a deeper look into the publicly traded BDC space, featuring some of its most heavily discounted players and some that have bucked the trend while showing strong long-term returns.

AI and your taxes

Don't Short Yourself - MarketWatch's new weekly newsletter - offers smart tips to help you earn, stack and grow your money.

In this week's Don't Short Yourself newsletter, Andrew Keshner offered advice on how and when to use artificial intelligence to help prepare your tax return.

More from Andrew Keshner:

-- The sobering way most Americans plan to use their tax refunds this year

-- Crypto investors who don't fill out this new tax form the right way could overpay on their taxes

Trump's next tariff gambit

President Trump answered questions about the Supreme Court's decision against his use of emergency powers to implement country-specific tariffs during a press briefing at the White House on Feb. 20.

On Friday the U.S. Supreme Court ruled that President Donald Trump had exceeded his authority with the country-based tariffs he has set since the start of his second term in office last year.

In the majority opinion, Chief Justice John Roberts wrote that the International Emergency Economic Powers Act of 1977, which the Trump administration had cited as the basis for the president's authority to set country-specific tariffs, did not include "any mention of tariffs or duties."

The president doesn't give up easily. Robert Schroeder and Victor Reklaitis outlined Trump's immediate reaction - a new round of tariffs.

More reaction to the Supreme Court's decision on Trump's tariffs:

-- Will American companies get tariff refunds after the Supreme Court decision? What we know so far.

-- Retailers could win big on a repeal of Trump's tariffs. Here's why the stocks aren't rising.

-- Brett Arends: What a fiasco. Trump's tariffs are an economic and legal mess.

Fix your budget

You might be leaving a critical item out of your budget plan.

Even if you are careful to set a household budget, you might be making a big mistake that will spoil your plans, as Venessa Wong explained.

'Economic realities' and downgrades for the U.S. tech sector

The S&P 500's information technology sector has returned 807% over the past 10 years, while the full index has returned 325%.

Investors have gotten used to the information technology sector leading the S&P 500. It is the only sector of the S&P 500 that has beaten the full index's 10-year return of 325% through Thursday, as you can see above.

But the story has changed, at least over the short term, with the tech sector down 4% so far in 2026, while the full S&P 500 has risen slightly.

Here are the "economic realities" behind the decision of analysts at UBS to downgrade the U.S. tech sector this week.

More on the tech decline and reaction:

-- Citigroup's plan to survive AI aftershocks: Bet on bonds and small-cap stocks

-- While Wall Street is betting against software, retail investors have poured in - and done well

More tech coverage

Here are some of this week's articles from the MarketWatch Technology team:

-- Will Microsoft's stock finally rebound? A board member just bet $2 million on a turnaround.

-- How Amazon's 'underappreciated' AI potential could drive the stock 50% higher

-- Why Nvidia's deal with Meta is an 'Intel killer,' according to this analyst

-- Four reasons cybersecurity stocks are primed for a breakout

-- You can invest in SpaceX before its IPO - but should you?

Surprise: Deere's stock is having its best month in 50 years, as the tractor maker rides the AI boom

Estate planning with the Moneyist

Quentin Fottrell is the Moneyist.

Quentin Fottrell - the Moneyist - answers so many questions from readers about estate planning that he may not have expected to encounter any new twists. But this week a reader asked if it would be possible to stipulate that a "life-changing sum" she wishes to leave to her children not be used to support any political causes that she doesn't approve of.

Even if you aren't worried about such use of your money after your final exit, you might learn a lot about the types of trust accounts that might be most useful for your own estate plan.

More from the Moneyist: 'I won't take out a loan': I need $18K in house repairs. Do I take it from my Roth, 401(k) or IRA?

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-Philip van Doorn

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February 20, 2026 16:11 ET (21:11 GMT)

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