US indices have badly lagged their international counterparts of late. There’s one key reason for that – the S&P 500′s outsized exposure to poorly performing technology stocks.

Despite 2023′s early gains, the index remains below its 200-day moving average. However, the S&P 500′s internal performance is actually much stronger than it appears, with 65 per cent of stocks above their 200-day average.

All Star Charts’ JC Parets notes that it’s been easy to miss this under-the-radar strength. As an example, he points to the consumer discretionary sector. An equal-weighted version of the sector, which weighs all component stocks equally, has rallied almost 20 per cent off its lows, making it the strongest US sector over the past six months. However, a market capitalisation-weighted version is flat over the same period. Why? The cap-weighted version has been held back by the huge losses endured by its two largest holdings, Amazon and Tesla.

Similarly, an equal-weighted version of the Nasdaq 100 is making multiyear highs relative to its cap-weighted counterpart, which again has been hurt by its huge exposure to mega-cap tech stocks. At times like this, index performance can mislead, says Parets. “Most stocks are going up.”