The S&P 500: Still a Benchmark, or Just a Reflection?

Earlier this week, we explored the idea that the market may be entering a kind of hall of mirrors—where stories, tools, and interpretations begin to reinforce each other, sometimes at the expense of deeper truth.

Today, I want to bring that conversation closer to home.

For many investors, the S&P 500 is the most trusted benchmark in the world. It feels familiar. Diversified. Representative of the U.S. economy. 

But the truth is: the S&P 500 isn’t just reflecting the economy anymore. Increasingly, it may very well be reflecting itself.

Here’s what I mean:

The index is weighted by market capitalization—meaning the bigger a company becomes, the more influence it has on the whole index. Today, a small handful of companies account for a significant portion of the S&P’s total movement. Their growth isn’t just reflected by the index—it’s amplified by it.

And here’s the quiet shift:

As more and more money flows into passive strategies that track the index, those dollars go disproportionately to the companies that already dominate. This isn’t about performance or valuation. It’s about rules. 

Now add to that the role of AI and automated narratives.

As tools summarize, amplify, and even subtly shape the way we talk about “the market,” the stories most repeated tend to be the ones most believed. The attention follows the story. The dollars follow the attention. The index responds to the dollars.

It’s not a conspiracy.

It’s momentum—coded into the very structure of how we invest.

This is how the S&P 500, once a benchmark, can quietly become a mirror.

So what does this mean for us?

It means we need to stay curious.

The S&P 500 still has value—but it’s not a neutral snapshot. It’s a living, breathing reflection of flows, sentiment, structure, and attention. Understanding that allows us to use it wisely, not blindly.

At Somerset, this is why we believe so deeply in frameworks.

Not just asset allocations, but actual thought frameworks—ways to understand what you own and why. This is why we tier risk for each client based on volatility and separately, liquidity. 

We are not interested in chasing what’s loudest.

We’re interested in building what (we believe) will last. 

This means building portfolios that reflect your values, your goals, and your horizon—not just the weightings of an index that may (before long) be chasing its own tail.

We’ll continue using the greatest tools available, including AI when appropriate, to help us ask better questions and see patterns more clearly. But we will never let the tools outrun our discernment. That is our responsibility to you.

That’s the work. And we’re honored to do it with you.

Lauren Pearson, Managing Partner