As 2025 comes to a close, it is worth taking stock not just of where markets finished the year, but how they arrived there. U.S. equities delivered another year of strong headline returns, even as leadership narrowed and economic momentum cooled from the post-pandemic surge. Growth slowed without slipping into a traditional recession, inflation moderated, and monetary policy shifted from restrictive toward a more neutral stance. At the same time, investor outcomes became increasingly dependent on a small group of dominant companies, while international markets and select non-U.S. assets quietly reasserted themselves. The result is a year that looks healthy at the index level, but more complex—and more fragile—under the hood.
Markets: strong returns, but increasingly concentrated leadership
By late December, the S&P 500 was up roughly ~17–18% year-to-date. The NASDAQ compounded that strength, with year gains north of ~20% in the same year-end tallies. But the bigger takeaway is how those gains were generated: market leadership remained unusually concentrated, with the “Magnificent 7” (Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, Tesla) representing over ~35% of S&P 500 market cap.
That concentration defined much of the second half of the year. September’s Moran Monthly Digest highlighted a historically rare pattern—days when the S&P 500 rose despite negative market breadth—underscoring how index performance was being driven by fewer stocks rather than broad participation. By November, the same message showed up in different form: only ~51% of S&P 500 constituents were above their 200-day moving average, a technical signal consistent with weakening breadth beneath the index level.
This matters for portfolio construction because cap-weighted S&P 500 exposure behaved less like a diversified index and more like a concentrated growth allocation—especially in technology. By October, technology represented roughly 35.1% of the index—exceeding the 34.8% peak reached near the March 2000 dot-com apex…
To continue reading, please download the full Moran Monthly Digest here.