S&P 500 Hides a Stealth Bear Market Beneath a Flat Index

The S&P 500 has gone nowhere since June 1, but beneath the surface, a stealth bear market, driven by a series of significant value vs. growth rotations, has significantly impacted many S&P 500 members. Over the last five months, the S&P 500 is up about 1%, yet at some point during the period, 182 S&P 500 stocks, or 36% of the index, fell 20% or more from their 2026 highs. Furthermore, 108 stocks were already down 20% from their respective 2026 peaks before June. All in all, nearly 58% of the index has fallen at least 20% from peak to trough this year, which many consider bear-market territory. Market breadth like that usually signifies a declining market, not a flat one.

The relatively flat index reflects massive rotations, not a calm environment. The S&P 500 Growth ETF (NYSE:IVW) is down 2.6% since June 1, while the S&P 500 Value ETF (NYSE:IVE) is up 5.4%. That doesn’t nearly tell the whole story. Consider that the ratio of growth-to-value (IVW:IVE) fell 11% into late July, rallied 14% into early October, and has since given back 9%. Each swing of that ratio pushed one group of stocks lower while the other rose and compensated, keeping the S&P 500 relatively flat.  

This churning could have a constructive outcome. A series of rolling corrections, as we have had, unwinds excesses stock by stock, leaving the S&P 500 with less need to correct. However, none of this heavy rotational activity means the S&P 500 is immune from a correction. But doing so would likely require both growth and value to decline at the same time.

What To Watch Today

Earnings

Thursday, October 29, 2026. Q3 reports from market-moving names.

Economy

Thursday, October 29, 2026. GDP and PCE land together. All times ET.

Fed speakers: None scheduled. The first post-meeting remarks come Friday, when St. Louis Fed President Alberto Musalem speaks at 12:30 p.m. ET.

Source: Trading Economics (primary), confirmed against the BEA release schedule. As of October 28, 2026.

Reader Question: 20 Year Treasury Bonds

A reader sent us the following question:

I am contemplating buying a longer Treasury Bond. I see that the 20-year has a higher yield than the 10- and 30-year. Why wouldn’t I buy the 20-year?

As we wrote our response, the 20-year Treasury yield was 5.343%, versus 5.280% on the 30-year and 4.995% on the 10-year. The curve humps in the middle of the long end, which, as our reader alludes to, is extra yield.

The reason for the premium yield has nothing to do with credit risk, since all 3 options are obligations of the US Treasury. It is a function of demand. Pension funds and insurance companies tend to buy 30-year bonds to match their long 30+ year liabilities. Second, the 30-year is one of the most actively traded across the curve; thus, liquidity is robust. Unlike the 30-year or 10-year, the 20-year doesn’t have an active natural buyer base. To wit, the Treasury stopped issuing it in 1986, brought it back in May 2020, and auction sizes are much smaller than 10- and 30-year auctions. The bottom line: the extra yield compensates the buyer for owning something slightly less liquid, not something riskier.

Three considerations for our reader:

• As we show below, the 20-year bond yields about 21 bps more than it should on interpolated levels, but only 6bps more than the 30-year.
• Given our reader is likely buying small amounts compared to institutions, the liquidity differences between 10-, 20-, and 30-year bonds for a retail investor should be minimal.
• Duration matters. At 12.2 years of modified duration, a 47-basis-point rise in yields erases a full year of coupon. Alternatively, a five-year Treasury note yielding 5% can rise over 1% before it offsets the coupon payment.

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