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Illustration: Rae Cook/Axios

The S&P 500 is just below its record high. But most stocks in the index are actually down significantly, which has some concerned.

Why it matters: This implies that the gains driving the market index to record highs are not evenly distributed. But, it’s also not an unusual dynamic in the S&P’s recent history.

The details: According to Morgan Stanley research highlighted by Bloomberg on Friday, 56% of S&P 500 stocks were down by more than 10% from their recent highs. This compares to the S&P 500 as a whole, which is down by just 2% from its peak.

What they’re saying: Morgan Stanley chief U.S. equity strategist Mike Wilson predicts the weakness in the underperforming stocks will pull down the stronger stocks in a process he calls a “rolling correction,” eventually leading to the S&P 500 falling 10% from its high.

Yes, but: Brian Belski, BMO Capital Markets chief investment strategist, analyzed the S&P 500 since 1990 and found that it’s far from unusual to see most stocks in the market down significantly even as the index makes new highs.

  • On average, 55% of the S&P was down more than 10% from all-time highs at the points when the index closed at new highs.
  • During the period, the median stock was down an average of 12.1% from its all-time high when the S&P closed at a new high.

The big picture: Belski, who sees the S&P reaching 4,800 by year-end, acknowledges that the market performance could be “bumpy” going into the end of the year.

  • But his point is that there’s nothing particularly unusual about seeing half of the stocks in the market down significantly even as the market averages hit all-time highs. And historically, markets have often gone on to rally to even higher highs.

State of play: Investors and experts are generally pretty bearish about the short-term outlook.

  • According to the New York Fed’s new Survey of Consumer Expectations, respondents saw just a 39% likelihood that stocks would be higher in 12 months.
  • According to Deutsche Bank’s survey of market professionals, 58% of respondents said they expected the stock market to fall by 5% to 10% by the end of the year. Another 10% said the market would fall by more than 10% during the period.

The bottom line: At any given time, there are lots of winners and losers in the stock market.

  • The fact that the S&P 500 can actually be up despite so many of its components being down supports the case for being broadly diversified.

Go deeper

Consumer inflation expectations continue to rise

Data: New York Fed; Chart: Axios Visuals

Americans expect stuff to get a lot pricier.

Why it matters: Even though inflation may not actually rise to expected levels, the expectations alone can affect behavior.

Consumer prices posted modest increase in August

People walk outside a supermarket on the Upper West Side on September 5, 2021. Photo: Noam Galai/Getty Images

The core Consumer Price Index (CPI), which measures the price of goods and services excluding food and energy, increased 0.1% in August on a month-over-month basis.

The big picture: The core CPI numbers released Tuesday showed a smaller gain than the .3% increase economists were expecting. It was the smallest increase since February 2021.

The Exvangelicals

Illustration: Aïda Amer/Axios

Even as evangelicals maintain their position as the most popular religion in the U.S., a movement of self-described "exvangelicals" is breaking away, using social media to engage tens of thousands of former faithful.

The big picture: Donald Trump's presidency, as well as movements around LGBTQ rights, #MeToo and Black Lives Matter, drew more Americans into evangelical churches while also pushing some existing members away.