Key Points
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Investors won’t argue with the S&P 500 index’s more than fourfold total return over the last decade.
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Almost 40% of the benchmark is represented by the information technology sector.
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Going forward, the market’s performance will be tied to the potential payoff from the AI spending boom.
- 10 stocks we like better than S&P 500 Index ›
It’s impossible to argue with the S&P 500‘s (SNPINDEX: ^GSPC) performance. In the past decade, the benchmark index produced a total return of 316% (as of July 13). Had you invested $10,000 back then, you’d have $41,600 today. This is a historically strong showing, supporting what is undoubtedly a fantastic track record.
Those market participants who captured this gain have no complaints. But if I could tell all long-term investors one thing about the S&P 500 index right now, it would be this.
Are you bullish on technology?
The S&P 500 is structurally different these days. The economic backdrop has changed.
The information technology sector represents a notable 39% of the entire index. It is by far the biggest sector. Financials come in second place, with an 11% representation in the index.
Thirty years ago, the S&P 500 index didn’t look the same. The financial sector was the largest, at a 14% weight. Technology companies weren’t as prominent. And there was a much higher level of sector diversification.
Investors who buy an S&P 500 exchange-traded fund in 2026 are effectively stating with their dollars that they are bullish on the long-term outlook for the tech sector. Of course, this has worked out incredibly well in the last 10 years. Of the world’s three most valuable companies, Alphabet, the worst performer in the group, has still seen its share price soar 872% since July 2016.
Businesses in the tech sector have benefited from some pretty powerful secular trends. Digital advertising, digital payments, streaming entertainment, e-commerce, and cloud computing are key examples. These have provided companies with durable growth tailwinds, allowing them to expand their customer bases, increase revenues, boost profits, and strengthen their competitive positions.
Looking at the next decade and beyond, artificial intelligence (AI) is now taking center stage. Of the S&P 500 index’s top 10 holdings, four are hyperscalers, giving them a tremendous financial stake in the current AI boom. Microsoft, Amazon, Alphabet, and Meta Platforms combined plan to spend around $700 billion in capital expenditures in fiscal 2026, resulting in an unprecedented infrastructure build-out.
It’s logical to assume that the S&P 500 index’s performance going forward will be closely tied to the potential payoff from all this spending. If the returns are disappointing, it could introduce a headwind to the market that investors must be able to handle.
Should you buy stock in S&P 500 Index right now?
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, and Microsoft. The Motley Fool has a disclosure policy.
