In the first half of 2025, the S&P 500 outperformed the S&P 500 Equal Weight Index by over 1%, a rare occurrence since 1984. Historically, when this happens, the S&P 500 has returned an average of 21% in the following 12 months.

The S&P 500 saw a 5.5% increase in the first half of 2025, driven by strong performances from the “Magnificent Seven” stocks like Meta Platforms, Microsoft, and Nvidia. This small group of mega-cap companies contributed significantly to the index’s gains, outperforming the S&P 500 Equal Weight Index by 1.7 percentage points.

The S&P 500’s forward earnings multiple stands at 22.3, historically linked to a 3% annual return over three years. While the “Magnificent Seven” companies are reporting strong earnings growth, the broader market is expected to see accelerating earnings, hinting at a potential market rally.

Investors should note that the S&P 500’s previous outperformance of its equal-weight counterpart resulted in an average 21% return in the following 12 months. With the index closing at 6,205 on June 30, 2025, historical trends suggest a potential 21% increase to 7,508 by June 30, 2026.

Despite current high valuations, the S&P 500’s strong earnings growth from top companies like Meta Platforms, Microsoft, and Nvidia bodes well for future performance. However, analysts predict a narrowing gap in earnings growth between these companies and the rest of the index, signaling a potential broadening of the market rally.

Read more at Nasdaq: The Stock Market Just Did Something for the 11th Time Since 1984. History Says It Signals a Big Move in the Next Year.