By Chad Warrick
Co-President & CEO
Watching the market evolve over decades is much like watching a city skyline change. In the early 1990s, the tallest towers were energy and industrial companies, while technology occupied only a small portion of the view (around 6% or 7% of the S&P 500). As the decade unfolded, tech steadily climbed higher, reaching about 10% to 12% by the mid-1990s as computers and the internet began reshaping the economy.
By the year 2000, technology had surged to nearly 34% of the index, while energy accounted for roughly 12%. The skyline looked impressive, but many of those new towers were hollow inside. The dot-com boom had pushed valuations to extreme levels, with the S&P 500 trading at 25 to 30 times earnings and many tech names soaring even higher despite generating little to no profit.
The new look
Fast forward to today and the skyline looks taller and much sturdier. Technology makes up about 31% of the S&P 500, while energy has shrunk to only 3% or 4%. The difference is that the foundations are real this time. Apple, Microsoft, and Nvidia earn billions in quarterly profits, more than some early dot-com companies made in their entire lifetimes. The shift from valuations based on hope to valuations supported by strong earnings is one of the clearest ways to understand how the market has matured.
Investors are still paying higher multiples today, with the index trading at around 22 times earnings. The reason is that business models are stronger. The largest companies now operate globally, earn recurring subscription revenue, and enjoy competitive advantages that are difficult to disrupt. Years of low interest rates have also made future earnings more valuable, leading to what is called multiple expansion. In simple terms, investors are willing to pay more for each dollar of profit than they once did, and that willingness has been a big driver of returns since 2010.
Although the S&P 500 still has 500 companies, it feels more concentrated than it used to. That is because so much of the performance comes from a handful of tech giants, and the S&P is a market capitalization-weighted index. This means larger companies like Apple or Microsoft wield far more influence on the index than smaller ones. When these giants move, the whole index moves. In contrast, an equal-weighted index would give each company the same impact regardless of size, leading to significantly different results over time.
Volatility lives on
Another quiet shift has taken place in retirement savings. Trillions of dollars flow automatically into 401(k)s and deferred compensation accounts every year. This steady stream of capital serves as a cushion during downturns. Volatility still happens, but the constant inflows provide stability that was missing in earlier decades.
The history of stress periods (shown in the chart below) makes this clear. In the dot-com crash, the financial crisis, and the pandemic, stock-heavy portfolios fell 40% to 50%, while balanced mixes saw smaller declines. Diversification does not erase risk, but it can soften the blow when the skyline suddenly shifts.
Even with all the turbulence, the S&P 500 has returned about 8% to 9% annually over the past 25 years.
Over that time, the U.S. population grew from 282 million to 335 million, and the global population went from 6 billion to more than 8 billion. This growth has fueled demand for technology, healthcare, and infrastructure, reshaping the index again and again.
Still a work in progress
Some towers of the past—think Enron, WorldCom, and AOL—have disappeared. Others, such as General Electric, still stand but no longer dominate the view. In their place, Microsoft, Amazon, Meta, and Nvidia have risen to define the skyline.
Looking ahead, the highest towers of 2050 may not even exist yet. Artificial intelligence, clean energy, biotech, or space exploration could create tomorrow’s leaders. While we cannot predict exactly which ones will rise, history has shown us that the skyline is always a work in progress.
Here’s to watching it evolve together over the next 25 years.
