After Technology stocks took a drubbing last year—the S&P 500 Information Technology sector index fell nearly 30%—the group staged a remarkable comeback in the first five months of 2023. Even as the 34% gain doesn’t quite bring values back to the high-water mark, this year’s surge, powered by enthusiasm for artificial intelligence, added an enormous $3.648 trillion to the market capitalizations of the top ten stocks in the S&P 500 index. On its own, Apple added $720 billion of market value, while Microsoft added another $654 billion. Nvidia, now the fifth- largest member of the S&P 500, saw its market value jump from $360 billion on December 31 to more than $1 trillion during the trading session on May 30.

Once again, the S&P 500’s nearly +10% return through May 31 makes it easy to overlook the lag in performance by the average stock in the index, which has actually lost 0.1% including dividends this year. The chasm offered us another reminder that it remains a market of stocks and not a stock market, and we believe many of the broad-market indexes, including the S&P 500, may fail to have the diversification needed to be considered a fair performance or valuation proxy for the overall U.S. stock market.

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