Freedom analysts: nearly 72% of S&P 500 stocks rose despite the index’s decline

The decline in the S&P 500 does not reflect the performance of most of its constituents, Freedom Broker analysts note. From the end of the second ten-day period of October through November 2, the index fell 1.94%, even though 71.7% of its member stocks posted positive returns. Experts attribute the divergence to investors rotating from the largest growth companies to other segments of the market.

More details — in Freedom Broker’s biweekly review.

Why the index doesn’t show the full picture

In the standard S&P 500, a company’s impact depends on its market value: moves by the largest constituents can outweigh gains in hundreds of other stocks. In the equal-weight version, all companies have the same weights. Over the period in question, it gained 3.08%, outperforming the main index by 5.02 percentage points.

Among the 15 largest S&P 500 companies, only 40% of the stocks rose. In the analysts’ view, this shows that the decline was concentrated primarily in the former leaders. There was no broad-based exit from equities by investors over this period.

Gains were spread across different sectors

Utilities led the way, up 5.59%, and healthcare rose 5.1%. Consumer staples stocks gained 4.15%. At the same time, the materials sector grew 5.34% and financials 4.54%: demand extended beyond defensive sectors as well. Smaller companies also posted positive performance. The S&P Small Cap 600 added 4.17%, and the S&P Mid Cap 400 gained 2.07%. Meanwhile, the Nasdaq-100 lost 5.21%.

Investors are changing their approach to stock selection

The смена of leaders is also evident when comparing investment styles. Among large-cap Value companies—stocks with relatively low valuations based on financial metrics—78.4% rose. In the Growth category, where investors bet on future business expansion, the share was 52.3%.

Analysts also note increased demand for dividend strategies and low-volatility stocks. Thus, the reallocation of funds is affecting not only sectors, but also the company characteristics investors prefer.

What the divergence means for the market

As of the analysis date, about 67% of S&P 500 stocks were trading above their average prices over the past 50 days. This breadth of gains softened the negative signal from the decline in the headline index. However, the resilience of most stocks on its own still did not confirm a market reversal to the upside, experts emphasize. In its assessment as of November 2, Freedom Broker maintained a neutral risk balance for the next two weeks.

This is not an individual investment recommendation.