The S&P 500: Is It Still a Good Measure, or Just a Tech Target?

Nvidia and the AI Frontier: A New Chapter in Market Leadership?

Nvidia's rapid rise, driven by the AI boom, brings a mix of excitement and skepticism. On one hand, the speed of AI development is thrilling, opening doors to new possibilities and industries. But on the other hand, Nvidia’s role in leading the S&P 500 to what feels like daily new highs—with occasional dips—calls to mind Goodhart’s law. For those who might need a refresher, Goodhart’s law states that when a measure becomes a target, it ceases to be a good measure.

Goodhart’s Law in the Modern Market: The S&P 500 as a Flawed Measure?

The S&P 500, which was once a reliable measure of market health, has arguably turned into a target. Investment managers are now tasked with not just tracking it, but also justifying their strategies against it. However, the real target isn’t the index itself—it's technology. The rest of the S&P 500 seems to be just along for the ride.

This isn't the first time we’ve been here. Remember the late '90s? The percentage of S&P constituents outperforming the index is at an all-time low, a pattern we saw at the end of the dot-com bubble. Back then, the internet promised an ambiguous future, much like AI does today. People knew it was a big deal but couldn’t fully grasp its implications. Now, history seems to be repeating itself, with the S&P 500 once again dominated by a few tech giants while the rest of the market struggles to keep up.

Riding the Waves: When to Stay on the Sidelines

So, where does this leave us as investors? For those following strategies like the Managed Risk Blueprint, there’s a fine line between measuring up to the S&P 500 and knowing when to step back. Certain market conditions, such as the dramatic downturns during the COVID crash or in 2022, highlight the importance of sitting on the sidelines rather than trying to match the S&P's performance at all costs.

The Real Target: Clients' Goals, Not Just the S&P

Ultimately, the S&P 500 isn’t the true target—it's your clients' goals. The key is to measure their progress toward these goals while maintaining their sanity along the way. In an environment where the S&P 500’s tech-centric nature distorts its role as a market measure, it’s crucial to keep sight of what really matters: achieving financial goals without getting caught up in the market's highs and lows.

So next time you find yourself caught up in the chatter about the S&P's latest moves, remember to step back and ask yourself: What’s the real target here? It might just be something far more personal than an index number.

DISCLOSURES

Toews Asset Management is an SEC registered investment adviser with its principal place of business in the State of New Jersey.

This presentation may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.

This video is intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice, and no representation is being made as to whether the information provided herein would be beneficial for any investor.

For additional information about Toews, including fees and services, send for our disclosure statement as set forth on Form ADV by contacting Toews at Toews Corporation, 1750 Zion Road, Suite 201, Northfield, NJ 08225-1844 or by visiting our website: www.toewscorp.com. 6695294 MK