The S&P 500 keeps climbing. Most of the stocks inside it do not.

Only 22% of S&P 500 constituents have outperformed the index over the past 30 days, marking the third-lowest proportion recorded since 1996. That means roughly four out of every five stocks in America’s benchmark index are dragging behind the headline number.

The Magnificent 7 problem

The so-called Magnificent 7, the mega-cap tech cohort that includes the likes of Apple, Nvidia, Microsoft, and their peers, now command nearly 35% of the S&P 500’s total market capitalization. Broaden the lens slightly to the top 10 firms, and you’re looking at 38% of the index’s market cap and 30% of its profits.

Information Technology and Communication Services alone account for 46% of the index’s total value.

Historic breadth metrics paint a grim picture

Only 22 stocks in the entire S&P 500 are currently sitting at all-time highs. For context, that figure peaked at 97 stocks back in March 2013 during the post-financial-crisis recovery.

As of early May, roughly 51% of S&P 500 stocks were trading above their 50-day simple moving average. Half the index trading below a key short-term support level while the index itself sits near highs is, to put it mildly, a contradiction.

Goldman Sachs and Bank of America have both flagged concerns about the risks embedded in this concentration. Historically, periods of extreme market narrowness have preceded bouts of significant volatility. When the index depends on a small group of stocks for its gains, any stumble by those names can cascade through the broader market far more violently than if gains were distributed evenly.

Why this matters beyond Wall Street

When 35% of that market is seven companies, diversification becomes an illusion.

The S&P 500 recently touched 7,398, a level that looks impressive in isolation. But strip out the mega-cap tech names and the picture changes dramatically. The equal-weighted version of the index, where every stock gets the same influence regardless of size, tells a much more modest story.

The Magnificent 7 stocks have become so dominant partly because passive fund inflows mechanically buy more of whatever is already largest. Bigger market cap means bigger index weight means more passive buying means bigger market cap.