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Is the Market Rally Broadening?

August 12, 2026

Time to Read: 2 minutes

Stocks, as measured by the S&P 500, are up over 13% through early August. The solid gains have been fueled by a resilient economy, steady consumer spending, optimism around artificial intelligence and better-than-expected earnings growth. Still, some investors worry the advance may be too concentrated in technology and AI-capex monetization may fall short of expectations. A closer look suggests that it is not just tech moving the market higher.

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With technology companies on track to deliver a roughly 50% earnings growth rate in 2026, it is not surprising that the sector has remained a major driver of market performance. However, market gains are not solely reliant on technology and AI-linked names. Excluding these, the S&P 500 is still posting solid gains of 8% year to date, which is a healthy sign and indicative of broader market strength.

A key measure of market breadth is the comparison between the market-cap weighted S&P 500 and the equal-weighted S&P 500. It may surprise some investors to learn that the equal-weighted S&P 500 Index is modestly outperforming the S&P 500 so far this year, with a gain of 14% versus 13.2% through early August. This suggests areas beyond technology and AI capex beneficiaries are contributing to moving the market higher.

Another way to evaluate whether the market is broadening is to look at how many stocks are trading above their recent trend. Currently, about 72% of S&P 500 companies are trading above their 200-day moving average. That is the highest level since December 2024.

Collectively, these measures suggest that breadth is improving – a constructive sign for the forward outlook.

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History of Stocks After the Fed Hikes

Sticky inflation and resilient growth have revived monetary tightening, increasing the risk of higher-for-longer rates and near-term volatility. We still believe economic resilience and strong corporate profits should continue to provide a favorable backdrop for stocks, and would use periods of market weakness to add selectively to equities. Additionally, owning real assets can help hedge against inflation.

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Inflation Is a Global Problem

Resilient economic growth, sticky inflation driven by higher energy prices and continued geopolitical uncertainty are complicating the path back to central-bank price targets. We believe policymakers are likely to adopt a tightening bias but remain data dependent.

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A Good Outlook for Global Earnings

Global earnings growth has been strong this year, led by the U.S. and reinforced by improving profit growth across Europe, Japan and other major markets. While volatility may rise in the near term, above-average earnings and broader global participation remain supportive of global equities.

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In a Real Regime Shift?

Higher inflation has been a dominant theme of the current decade. In addition to price shocks, it is being shaped by secular investment trends in infrastructure, defense spending, onshoring and the ongoing AI buildout. These structural changes reinforce the case for looking beyond traditional 60/40 portfolios to include real assets as a source of diversification and return potential in portfolios.

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