The S&P 500 Index is within about 3% of its latest record high and yet 60% of the benchmark is languishing in bear market territory.
It’s a startling picture highlighted by Goldman Sachs Group Inc. trader Bobby Molavi. The “strange thing” is that shares in both the tech megacaps whose capex is at the heart of the AI-powered equities rally and the receivers of that spending are going down together, he said.
“I don’t see how both can be penalized at the same time, especially when the base case remains that AI will change everything,” Molavi, the head of EMEA execution services at Goldman Sachs, wrote in a note to clients. He described the setup as a “stealth bear market.”
A powerful rotation as investors switch out of AI-related stocks because of concerns over the sustainability of massive spending has hammered tech stocks in recent weeks. On the other hand, most S&P 500 members are up over the past month as money moves out of crowded trades into defensive and under-owned corners.
Since Oct. 15, the Magnificent Seven cohort have shed $4 trillion of market value and, for the first time that he can remember, earnings were “not good enough,” he said.