Sound Advice: July30, 2026

How is the stock market doing?

As of late July 2026, the answer depends on exactly how you measure it, but the numbers show a striking difference.

• S&P 500 (cap-weighted): about +8.5% year to date.
• S&P 500 Ex-Magnificent 7 Index: about +12.2% year to date (price return as of July 24, 2026).

That means the S&P 500 excluding the Magnificent Seven has actually outperformed the traditional S&P 500 by roughly 3.7 percentage points so far this year.

This is a notable reversal from 2023–2025, when the Magnificent Seven (Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, and Tesla) were responsible for a disproportionate share of the index's gains. In 2026:

• Several Magnificent Seven stocks have stumbled or corrected.
• Healthcare, financials, industrials, and many smaller technology and semiconductor companies have taken over market leadership.
• The equal-weighted S&P 500 has also outperformed the traditional cap-weighted index, another sign that gains have become much broader across the market.

For investors, this is an important reminder that headlines about "the S&P 500" don't always tell the full story. A capitalization-weighted index can be heavily influenced by a handful of mega-cap stocks, while measures such as the equal-weighted S&P 500 or the S&P 500 Ex-Magnificent 7 Index can provide a better sense of how the average large U.S. company is performing.

What is the return of the equal-weighted S&P 500 Index excluding the Magnificent Seven stocks?

There is not a widely published index that is both:

1. Equal-weighted, and
2. Excludes the Magnificent Seven

So there isn't an official S&P Dow Jones benchmark that reports this combination the way it does for:

• S&P 500 Equal Weight Index (YTD +11.44% as of July 24, 2026), and
• S&P 500 Ex-Magnificent 7 Index (YTD +12.22% as of July 24, 2026).

Even so, because the Magnificent Seven each represent only about 0.2% of an equal-weight index (roughly 1.4% combined), removing them has only a modest impact on performance. Based on their collective performance this year, the equal-weight S&P 500 excluding the Magnificent Seven would likely be approximately +11.5% to +12.0% year to date—very close to the published equal-weight index.

This illustrates an important point:

Index	Approx. YTD Return
S&P 500 (cap-weighted)	~8.5%
S&P 500 Ex-Magnificent 7	12.2%
S&P 500 Equal Weight	11.4%
Equal Weight Ex-Magnificent 7	≈11.5–12.0% (estimated)

The takeaway is that 2026 has been a year of broad market participation. Once you either (1) remove the Magnificent Seven from a cap-weighted index or (2) greatly reduce their influence through equal weighting, the rest of the market has delivered returns in roughly the low-double-digit range.

And what is the likelihood of a major market pullback in the next 12 to 18 months?

No one can reliably assign a precise probability to a major market pullback over the next 12–18 months. If they could, they'd have an enormous investing edge. But we can look at history and today's conditions to frame the risk.

Historically:

• A 10% correction occurs about once every 1–2 years.
• A 20% or greater bear market has occurred about once every 5–7 years, though the timing is highly irregular.

Given today's backdrop, I would characterize the risk like this:

Pullback	My assessment
5–10%	Very likely
10–20%	More likely than not
More than 20%	Plausible, but not the base case

 Several factors argue for increased volatility:

• Equity valuations remain elevated by historical standards.
• Interest rates are still relatively high, and investors are uncertain about the Federal Reserve's next moves.
• Geopolitical risks, including energy markets, remain elevated.
• Corporate earnings expectations are high, leaving less room for disappointment.

On the other hand, there are also constructive factors:

• Earnings growth has broadened beyond just the largest technology companies.
• Market participation has improved this year, with more sectors contributing to gains.
• Many institutional forecasts still expect positive equity returns over the next year rather than an imminent recession.

The statistic I find most useful isn't the probability of a correction—it's this:

If you're invested long enough, you should expect a 10–15% decline from time to time. It's normal, not exceptional.

The bigger question is whether a pullback would be driven by a weakening economy or simply by investors paying lower prices for the same earnings. Those are very different environments.

Based on the market breadth, one encouraging sign is that 2026's gains have been much broader than in prior years. Bull markets supported by a wide range of companies are generally viewed as healthier than those led by only a handful of mega-cap stocks. That doesn't eliminate correction risk, but it may reduce the market's dependence on a small group of companies.

So if I had to summarize the next 12–18 months in one sentence, it would be:

• A normal correction (10–15%) would not surprise me at all.
• A deep bear market (30%+) is possible but does not appear to be the most likely outcome based on the information currently available.