The S&P 500 is close to a record high, but more than half of the companies in the broader US stock market have suffered sharp losses. The US stock market is showing two very different pictures. This means the index looks strong even as many individual stocks struggle.
More than half of US stocks have fallen at least 20%. Data from Morgan Stanley show that 54% of companies in the Russell 3000 index have dropped at least 20% from their June 2026 highs. The Russell 3000 tracks a broad range of US companies. Wilson believes continued volatility in the bond market could lead to a 5% to 10% decline in the S&P 500. Such flows can widen the gap between the S&P 500 and the broader market. A small number of large companies are helping the S&P 500 stay close to its record.
However, this is his outlook, not a confirmed prediction that the index will fall by that amount. Rising bond market volatility could put more pressure on stocks. Falling stocks can also face pressure from investors who are forced to sell. Portfolio managers whose investments are losing money may face pressure from clients. Some investors may withdraw money from funds, forcing managers to sell shares to meet those withdrawals. Risk-management systems may also require funds to reduce their exposure when market volatility rises. Money can flow towards the same large companies that are already supporting the index. This can direct more investment towards the largest companies while struggling stocks receive less support. The performance of the biggest stocks remains a major risk. If these companies fail to meet investors’ expectations, their share prices could fall and put pressure on the entire index. The narrower the market’s leadership becomes, the more the index depends on those companies.
Investors may move money into index funds, which invest according to the companies and weights in a particular index.
Morgan Stanley sees possible opportunities in industrial stocks. The bank sees attractive risk and reward in some quality industrial companies whose share prices have weakened even though their earnings expectations remain reasonably strong.
These businesses may have been hurt by higher interest rates, concerns about economic growth and investors favouring large technology companies, according to Forbes.
