The S&P 500’s quieter cousin—the Equal-Weighted Index—continues to climb, suggesting the market’s supporting cast is finally getting more lines in the script. Despite the cap-weighted index’s recent retreat, our technical gauges remain fully invested and notably unshaken.
Picture the scene: it's Thursday afternoon, one trading session shy of a three-day weekend, and Wall Street is doing what it does best before a long break — throwing itself a party while quietly hiding the bar tab from certain guests. The Dow waltzed to a fresh record high. The S&P shrugged. And the Nasdaq's semiconductor contingent — last seen levitating on AI fumes for six straight months — got hauled out back and had a very public disagreement with gravity. Somewhere, a memory-chip columnist felt a great disturbance in the force, as if a million spreadsheets cried out and were suddenly revalued.
The Broadening Trade (Or: Not All Fireworks Are Silicon)
For the week ending Thursday, July 2 (markets were closed Friday for a holiday that needs no introduction), the S&P 500 modestly lost 0.21%, closing at 7,483.24. The Nasdaq Composite fell by 1.45%, as semiconductors buckled late in the week, while the Dow — the least glamorous index at every dinner party — rose roughly 2% to a fresh record above 52,900, carried by defense names and a rotation into things that don't require a GPU. Treasuries told a noisier story: the 10-year yield inched up just 11 basis points to 4.49%, raising fears of rising rates, which sent the Bloomberg LT US Treasuries index down 0.65%.
In a fitting nod to the holiday — this great, if occasionally overleveraged, experiment we call a market — the S&P 500 Equal Weight Index outperformed its cap-weighted sibling by 333 basis points in June alone, a none-too-subtle sign that the rally has been trying to widen its guest list beyond the usual half-dozen mega-cap headliners. That theme carried into July: over the first two trading days of the month, the cap-weighted S&P 500 returned -0.21% while the equal-weight index gained +1.01%, as technology and semiconductor names pulled back amid AI jitters, while Financials and Healthcare stepped in as the early sector leaders. Independence, it turns out, isn't a bad theme for a market trying to shake its dependence on a handful of chipmakers.
Catalyst One: The Jobs Report Plays Hard to Get
June nonfarm payrolls rose just 57,000, badly missing the 114,000 consensus and well below May's 129,000, while April and May were revised down a combined 74,000 — the kind of quiet backpedaling economists usually reserve for predictions about crypto. The unemployment rate actually dipped to 4.2% from 4.3%, but only because labor force participation fell to 61.5%, its lowest since March 2021; fewer people counted as looking isn't the same as more people finding work. Pro: it all but closes the door on a July hike and gave the two-year note room to rally. Con: "cooling labor market" is a phrase that ages very differently depending on whether you’re long or short. Not everything cooled, though — U.S. factory orders excluding transportation, a decent proxy for manufacturing health, rose a solid 1.9% month-over-month, a quiet reminder that the economy rarely reads from one script.
Catalyst Two: The AI Trade Gets Carded
The real fireworks were in semiconductors, where the Philadelphia Semiconductor Index fell nearly 6% on Thursday and roughly 12% over two sessions, triggered by an overnight 8% plunge in Korea's memory-heavy KOSPI. Micron dropped more than 15%, Applied Materials fell 16%, and AMD slid 10% — a rough sequel for a sector that had just logged its best six-month run in history. Nvidia, which briefly crossed a $5 trillion market cap in June, has settled back to roughly $4.7 trillion; still comfortably the largest weight in the S&P 500, but proof that even the belle of the ball needs to sit one out occasionally. Layer in reports that OpenAI is discussing selling a 5% stake to the U.S. government, plus Meta's announcement that it may start renting out its “excess” compute — a headline the market cheered as visionary on Wednesday, then quietly filed under “tacit admission of overbuilding” by Thursday — and the valuation conversation finally showed up uninvited, like a relative at the cookout nobody remembers inviting.
Looking Ahead
Fed Chair Kevin Warsh, holding court at an ECB conference in Portugal, managed to say a great deal about very little, offering no forward guidance while allowing only that “prices are too high” — a governing style perhaps best described as hawkish mime.
WTI crude held below $70 a barrel, seemingly unbothered by lingering uncertainty around the U.S.-Iran ceasefire — geopolitical risk premiums, like backyard patience on the Fourth, apparently run short these days. Meanwhile, the broadening rally kept doing its job: the equal-weight S&P and the Russell 2000 both notched fresh highs, a reminder that not everything in this market needs a data center to succeed.
With markets dark Friday and a light data calendar next week, near-term direction likely hinges on whether the semiconductor selloff is a healthy breather or the first crack in the AI story's foundation. Either way, the first half of 2026 is now in the books — Nasdaq +13.1%, S&P +10.2%, Russell 2000 +22.6%.
"The founders bequeathed to us this great, but flawed system. And we have had to keep repairing it and improving it, but they left us with the tools to do that. They left us the institutions that have allowed us to do it, left us with the principles that have animated it. And so we're always kind of striving, always moving towards that more perfect union, which we will never achieve. But as long as we're moving in the right direction, we will be OK."
—Presidential Historian Biographer Ron Chernow, PBS Crossroads America at 250, July 2, 2026.
Perspectives from Affinity Investments:
Has Passive Investing Become a Victim of Its Own Success?
What the SpaceX IPO May Tell Us About the Future of Investing
By Greg Lai, CFA
There are moments in investing when the rules don't change, but the playing field does. Or perhaps it's the other way around?
Fifty years ago, the challenge was gaining diversified exposure to the public markets. Twenty-five years ago, the challenge was reducing costs, minimizing taxes, and avoiding unnecessary trading. The rise of index investing solved many of those problems and, in doing so, transformed the investment industry.
It has been one of the greatest financial innovations/transformations of our time.
Today, however, the investment landscape may be changing once again.
SpaceX's recent public debut captured the attention of investors around the world. Much of the discussion centered on where the stock traded during its first few days. Was the market overly optimistic? Was the valuation justified? Had investors overreacted?
Perhaps. What caught my attention was something entirely different.
At my monthly Mahjong game—a group of friends who rarely discuss IPO allocations—several people casually mentioned they had received SpaceX shares. It struck me as odd. Here was one of the most anticipated public offerings in years, yet allocations appeared surprisingly widespread.
Whether that observation ultimately proves meaningful is beside the point. It caused me to wonder whether we were witnessing something larger than another successful IPO.
I believe we were.
The real significance of SpaceX isn't what happened after it became public; it's what happened before.
For nearly a quarter-century, SpaceX has grown into one of the world's most innovative and valuable companies while remaining private. During that time, it raised billions of dollars, disrupted multiple industries, pioneered reusable rockets, and created extraordinary economic value. At various points, Elon Musk himself admitted he wasn't certain the company would survive.
Yet virtually all of that value creation occurred before most public investors had the opportunity to participate.
That raises a simple but profound question: What does it really mean to "own the market" in 2026?
For decades, the answer seemed obvious. Buy a low-cost index fund and participate in the long-term growth of corporate America. For most investors, that has been excellent advice.
Passive investing has democratized investing. It has lowered costs, reduced unnecessary trading, and helped millions of investors accumulate wealth through disciplined, long-term ownership. None of that has changed.
What may have changed is one of the assumptions behind indexing. Indexes are designed to reflect the public markets.
They don't identify tomorrow's winners. They recognize today's. That realization stopped me for a moment.
It's obvious once you say it out loud, yet we rarely think about it.
Companies enter major indexes only AFTER they have already demonstrated success, achieved significant market value, and satisfied a defined set of eligibility rules.
In other words, indexes don't discover great companies.
They acknowledge them and, increasingly, amplify them.
Once admitted, capitalization-weighted indexes direct enormous amounts of passive capital toward companies that have already succeeded, reinforcing their positions not only individually but also collectively. In SpaceX's case, it could be over $2 trillion!
We aren’t surprised; it is exactly what indexes are designed to do. (For another day, it can be argued that index companies benefit from the constant flow of dollars by tracking the index)
But that distinction has become increasingly important.
Many of today's most innovative businesses are remaining private longer than previous generations. Abundant private capital has removed the urgency to access public markets. By the time many companies finally go public, a significant portion of their value creation has already occurred.
At the same time, the number of publicly traded companies in the United States has declined dramatically from its peak in the 1990s. Down by half!
That creates an interesting paradox.
Passive investing has become the dominant investment strategy, yet the investable public market may represent a shrinking share of where innovation actually occurs.
That isn't an indictment of indexing.
It is simply a recognition of what indexing is designed to accomplish.
Indexes efficiently capture the collective judgment of the marketplace. They are not intended to predict the future.
That responsibility still belongs to active investors.
Every day, active managers debate valuations, evaluate management teams, examine competitive advantages, and seek to identify which businesses may become tomorrow's market leaders. Most will be wrong. Some will be spectacularly right. Together, they perform one of the market's most essential functions: price discovery.
Without active investors, there is no market price.Passive investors don't determine value.
They accept it.
This isn't an argument that active investing is superior.
History has demonstrated that consistently outperforming broad market indexes is extraordinarily difficult.
Nor is this an argument against passive investing.
The evidence supporting low-cost indexing remains compelling. Rather, it is an acknowledgment that the investment ecosystem depends on both approaches.
Passive investing provides efficient exposure to established markets. Active investing provides the continuous process of discovery that allows markets to function in the first place.
Perhaps the larger question isn't whether active or passive investing is better.
Perhaps the more important question is whether the definition of "the market" has quietly changed.
If transformational companies continue to create substantial value while still private, and if public markets continue to shrink as a percentage of the broader opportunity set, then investors should periodically revisit assumptions that have served them well for decades.
Investing has always evolved. Railroads gave way to automobiles. Automobiles gave way to software. Software gave way to artificial intelligence.
Perhaps the next evolution isn't simply about which companies will win.
Perhaps it is about where they create value—and when and what type of investors are invited to participate.
The SpaceX IPO may ultimately be remembered for more than its valuation or its first week of trading. It may mark the moment investors began asking a different question.
Not whether active investing or passive investing is better. But whether owning the market still means owning the future.
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.
WEEK AHEAD
July 6-10, 2026
Weekly Market Commentary:
And the Fireworks Sparkle (Just Not From Chips)
The Broadening Trade (Or: Not All Fireworks Are Silicon)
Catalyst Two: The AI Trade Gets Carded
Looking Ahead
Perspectives from Affinity Investments:
Has Passive Investing Become a Victim of Its Own Success?
What the SpaceX IPO May Tell Us About the Future of Investing
By Greg Lai, CFA
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.