The S&P 500 has closed at a new record high some 25 times this year, the most recent taking place just last week. The benchmark, which is now up about 13% — as measured by the performance of the State Street SPDR S&P 500 ETF (SPYM) in 2026 — has been boosted by momentum, solid earnings and ongoing economic growth. The near-term noise, however, has been significant, centered on geopolitical heat, inflation concerns, and an uncertain monetary policy path going forward.
Key Takeaways:
- Long-term bullish trend remains intact with S&P 500 delivering 13% YTD gain.
- Near-term technical divergence signals exhaustion amid short-term geopolitical and inflationary headwinds.
- Broadening market rotation reaching sector level.
When we take a step back, we see an ongoing tug-of-war between long-term strength and short-term challenges. Look at this chart (below) plotting the S&P 500 index against its 200-day and 50-day moving averages:
Source: VettaFi/ AdvisorPerspectives
From a long-term perspective, the trend looks bullish. The S&P 500 has not only been forging new record highs along the way, but it has managed to stay above its 200-day moving average since early April.
Technicals Telling a Story
What’s more, the 50-day moving average has been trading above the 200-day since early July, 2025. That flip is known as a ‘Golden Cross.’ If sustained for over a year, this technical milestone signals that the structural foundation of the bull market is indeed solid.
In a shorter time horizon, however, the story is different. Despite record highs as recently as last week, short-term momentum in the S&P 500 has slowed down. The S&P 500 has been stuck below its 50-day moving average since July 23. This chart suggests bulls are there, but they are running a little tired.
Technical analysts will tell us that this kind of technical divergence between record highs and near-term averages often points to a change in market leadership and a rotation — be it factor or, more often, sector-based.
At the factor level, my colleague Kirsten Chang recently noted that there’s an ongoing broadening rotation “fueled by a decisive AI pivot, a sharp valuation reset, and index reconstruction.” All of which have put value investing front and center.
At a sector investing level, we’ve seen some change in leadership in recent weeks. In fact, it’s energy, healthcare, materials, and financials that have been leading market performance in the past month. All have outperformed the broader S&P 500, while tech — despite leading July ETF inflows — has been flat during this recent stretch.
See more: Sector ETFs Post Record $25B Inflow as Tech Leads
Source: SSIM Sector Tracker
Earnings Impact
With nearly 90% of S&P 500 companies having already reported Q2 earnings, we’ve learned that recent tech leaders continue to deliver impressive growth across the board, but a broadening is indeed taking shape.
At least 10 sectors have reported earnings growth year over year, eight of them delivering double digit expansion. Every sector has seen revenue growth in the past year, according to FactSet data. Results have been largely positive all around, but single companies have had a big impact on sector results, sub-industries mattered, and sector dispersion ultimately remains wide.
Source: FactSet, as of Aug 7.
Sector Rotation Insights
It’s in this context of an ongoing market rotation that we’ll dive into sector-specific opportunities with the team at State Street Investment Management next week.
From sector dispersion to correlations to potential risks associated with monetary policy, midterm elections, geopolitics, and inflation — we’ll explore the leaders turn laggards turn leaders again, and dive into where sector opportunities loom largest.
Join us for the “Earnings, Income & Sector Opportunities: Positioning for a Changing Market Regime” webcast on August 18.
Originally posted on ETF Trends
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