I have a great belief that everything is cyclical in life, particularly in the investment world. — Jean-Marie Eveillard
I have a great belief that everything is cyclical in life, particularly in the investment world.
Today, IT represents a 32.3% weight in the S&P 500 Index, placing nearly one-third of the index in a single sector, while materials and energy together account for 5.5%. The spread between those weights is among the widest in more than three decades, and it reflects a cycle that developed as technology leadership compounded through 2025 and into early 2026. Price action so far this year has begun to move the other way, and the market might be starting to test the concentration that developed over the prior cycle.
Over the past several decades, sector leadership within the index has not remained fixed. IT carried a dominant weight in the late 1990s before that share compressed in the early 2000s. Materials and energy then rose in prominence as profitability expanded, and their share of earnings and capital investment increased within the index. That phase eventually gave way to renewed technology leadership as resource-oriented sectors receded within the benchmark. The composition of the S&P 500 has shifted as profits and capital investment cycled across sectors.
The profit and cash flow numbers correspond with the index weights. IT generates 23.8% of total net income and produces roughly 30% of aggregate free cash flow. Materials and energy account for 5.5% of market value, 5.4% of net income and 7.1% of aggregate free cash flow.
IT now accounts for roughly 14% to 15% of total S&P 500 capital expenditures (capex) while energy represents about 8% to 9%. Since 2020, capex at several hyperscalers has increased multiple-fold as balance sheets have been committed to data centers, custom silicon, networking capacity and long-term power agreements, as discussed in Is Apple the Canary in the Capex Coal Mine? More than a decade ago, the capital spending split looked very different, with energy exceeding 30% of index-wide capital spending during the commodity expansion of the early 2010s and IT representing a far smaller weight. Capital spending has shifted with profitability and market value, and reinvestment now follows the same leadership reflected in the index.
Periods in which a single sector has represented a large share of market value have historically given way to dispersion as capital reallocated in response to shifting profitability. Each cycle has carried its own narrative, and leadership has rotated as profits and capital investment shifted among sectors.
The S&P 500 today reflects a cycle in which digital sectors occupy the center of market value, earnings and capital investment while materials and energy represent a modest share of the index. Concentration at this scale has not historically remained fixed, and prior periods of dominance have given way to rotation. The chart shows how concentrated the index has become.
Between the Lines is a weekly blog by DoubleLine Portfolio Managers Sam Garza, Joseph Mezyk and Quant Analysts Fei He, CFA and Sunyu Wang that breaks down topical macro and market issues. For questions or suggestions please e-mail us at betweenthelines@doubleline.com. The views and opinions expressed herein are those of the authors and do not necessarily reflect the views of DoubleLine Capital LP, its affiliates or employees.
