Indexology^® Blog

As the dust settled from Tax Day, U.S. equities found themselves nearly approaching correction territory. Amid concerns over tariffs and other global trade frictions, the S&P 500^® has fallen 5.6% YTD through April 28, 2025. In Exhibit 1, we see that The 500™ experienced its most significant drop in 2025 of nearly 6% on April 4, followed by a remarkable rebound on April 9 when it gained 9.5%. Although we’ve recently had multiple consecutive days of gains, these swings underscore the substantially challenging environment market participants are navigating, with the benchmark ending 35 out of 79 trading days in negative territory.

While this might seem like a cause for concern, there may be a silver lining: the opportunity for tax optimization. This approach allows market participants to potentially offset capital gains with losses, reducing their tax liability and diminishing the financial impact of a volatile market.

Such opportunities exist not only at the overall market level, but at the constituent level too. In fact, 66% of S&P 500 constituents have posted negative returns YTD through April 23, 2025 (see Exhibit 2), which represented about 75% of the total index market capitalization over the period.

When we zoom out, however, it becomes apparent that this is not unprecedented compared to historical down markets. Exhibit 3 captures this broader perspective and displays the percentage of stocks that experienced positive and negative annual returns from 2002 to 2024, including through YTD 2025. Over the last 23 years, there were four years that The 500 finished in negative territory—2002, 2008, 2018 and 2022. In those years, the average percentage of down stocks was 74%. Across all years, excluding 2025, the average percentage of down stocks was roughly half of that, about 36%.

As we move forward in 2025, a focus for some investors may be on navigating the complexities of the market while simultaneously maximizing the benefits of tax-efficient strategies. The current downturn, while daunting, could present opportunities for those who are prepared to take advantage of ETFs and direct indexing strategies for potentially different tax outcomes than traditional active mutual funds. By staying informed and proactive, investors may hope to turn the challenges of the market into opportunities for tax savings.

S&P Dow Jones Indices does not provide tax, legal, or accounting advice. This content is provided as of April 2025, and has been prepared for informational purposes only. An appropriate advisor should be consulted to evaluate the impact of any tax consequences of making any particular investment decision. All information provided by S&P Dow Jones Indices is impersonal and not tailored to the needs of any person, entity, or group of persons. It is not intended to be, and should not be relied upon as, tax, legal, or accounting advice and you should consult your own advisors before engaging in any transaction. Neither S&P Dow Jones Indices LLC nor any of its affiliates shall have any liability for any errors or omissions in the data included therein.

As uncertainties around tariffs, inflation and interest rates continue to make headlines, how are yield seekers viewing munis? S&P DJI’s Jennifer Schnabl and Vanguard’s David Sharp discuss key performance drivers of munis in challenging markets.

The S&P 500^® Top 20 Select Index series launched in August 2024 and is designed to measure the capped market-capitalization-weighted performance of the largest 20 companies, by float market cap, in the S&P 500. Previous blogs introduced the S&P 500 Top 20 Select Indices, covering their construction, objectives and historical performance. This installment examines the index’s volatility, correlation and dispersion to provide insight into its historical behavior relative to The 500™.

Slightly Higher Volatility

Exhibit 1 provides a calendar year breakdown of the S&P 500 Top 20 Select Index’s volatility compared to The 500. In several years, the Top 20 recorded slightly lower volatility than The 500—particularly during certain notable market events (e.g., the global financial crisis in 2008 and 2009). Conversely, during periods of elevated volatility for the S&P 500 Top 20 Select Index (e.g., 2020 and 2022), volatility closely tracked broader market moves, suggesting that these differences may be driven more by external market forces than by the index’s composition.

More broadly, over the past 10 years (2015-2024), the average annual volatility for the S&P 500 Top 20 Select Index was 18.5%, slightly above the broader S&P 500’s 16.2%. Over the recent five-year period, volatility remained modestly higher (22.5% versus 19.5%).

How Closely Do Mega-Cap Stocks Move in Sync?

The S&P 500 Top 20 Select Index comprises a smaller number of constituents than The 500. Historically, the performance of these mega-cap constituents has tended to move more closely together over time. On average, the index exhibited higher correlation among its constituents compared to the broader S&P 500 (see Exhibit 2).

How Varied Are Returns within the Index?

Dispersion measures how differently individual components perform compared to the average. Lower dispersion indicates more uniform performance across constituents, while higher dispersion suggests greater variability. Exhibit 3 illustrates that the S&P 500 Top 20 Select Index consistently showed lower dispersion compared to the broader S&P 500 over both 10-year and 5-year periods. This lower dispersion suggests that the individual performance of the index constituents typically differs less from the index average, indicating less variability in how these mega-cap constituents perform relative to the index average.

Conclusion

A closer look at volatility, correlation and dispersion reveals that the S&P 500 Top 20 Select Index has exhibited modest differences compared to the broader S&P 500. These include slightly higher average volatility and correlation, along with somewhat lower average dispersion over the past 5- and 10-year periods. Taken together, these metrics provide a historical view of how the index has behaved across different market environments.

The world is undergoing significant changes as it navigates the energy transition, marking a shift toward innovative and more efficient energy sources. In this evolving context, indices can play a crucial role by offering diverse measurements that represent various facets of the energy transition.¹

Buildings, which account for a substantial portion of global energy consumption attributed to the real estate sector,² are at the forefront of this transition. The Dow Jones Global Select ESG Tilted Real Estate Securities Index (RESI) exemplifies how indices can provide a framework for evaluating Real Estate that is responsive to the demands of the energy transition.

Launched in 2021, the Dow Jones Global Select ESG Tilted RESI measures the performance of publicly traded Real Estate securities from its benchmark, the Dow Jones Global Select RESI, that meet sustainability criteria. The index targets to improve the GRESB Total ESG score relative to the underlying index by overweighting those companies with higher GRESB scores and underweighting those with lower or no scores.³

As illustrated in Exhibit 1, since its launch, the index performed similarly to its benchmark, the Dow Jones Global Select RESI, and achieved an excess total return of 0.12% for the one-year period ending March 31, 2025.

Digging deeper into the GICS Real Estate sub-industries within this index reveals important insights related to their contribution to the Dow Jones Global Select ESG Tilted RESI’s relative performance for the one-year period ending March 31, 2025, as well as their respective carbon intensity, as illustrated in Exhibit 2. The size of the bubbles corresponds to the level of carbon intensity, with larger bubbles representing a greater carbon footprint. Additionally, the color gradient illustrates the different levels of carbon intensity, ranging from dark blue for the highest intensity to light blue for the lowest.

A notable example is Data Center Real Estate Investment Trusts (REITs), which have become increasingly relevant due to the surge in demand for artificial intelligence, which is powered by data centers. Data centers are energy-intensive, requiring substantial energy supplies to function. Despite their significance in a technology-driven economy, they detracted from the Dow Jones Global Select ESG Tilted RESI’s relative performance by 0.11% and stood out as the most carbon intensive Real Estate sub-industry.

Conversely, the Health Care sub-industry had the largest contribution to the index’s relative performance, with 0.34%, but it also had the second-highest carbon footprint.

In conclusion, the Dow Jones Global Select ESG Tilted RESI can serve as a vital tool for understanding how the energy transition is influencing the Real Estate sector. As the world continues to evolve toward more efficient and newly emerging energy practices, such indices can be instrumental in measuring the unique role the Real Estate sector plays in the world’s energy future.

¹ For an overview of indices in the energy transition context, see: Beyhan, Maya and William Kennedy. “The Role of Indices in the Energy Transition.” S&P Global. Look Forward Journal. March 4, 2025.

² For a thorough overview of the role of buildings in energy systems, see: International Energy Agency: https://www.iea.org/energy-system/buildings

³ See the Dow Jones ESG Real Estate Indices Methodology.

⁴ For more information, see: Index Carbon Metrics Explained.

How can an index help market participants benchmark the developed world? Take a deep dive into the S&P World Index as we explore its coverage and usage, its performance history and why it continues to be a tough index for actively managed funds to beat with S&P DJI’s John Welling and Anu Ganti.