Good morning,
While the S&P 500 Equal Weight Index advanced to a new all-time high last week, most other major U.S. equity indices declined (non-U.S. markets were largely flat). The divergence continues.
Much of the week’s selling pressure stemmed from rising concerns about AI-driven disruption — and not just within software. AI-enabled tools were launched across wealth management, real estate, and trucking/logistics — three sectors that subsequently sold off.
The irony is hard to miss. For the past several years, U.S. economic growth and equity performance have been fueled in large part by massive capital spending on AI infrastructure. Now AI is increasingly viewed as a potential threat to established business models — both a blessing and a curse.
Outside the AI narrative, last week’s economic data was constructive. The monthly jobs report exceeded expectations, inflation data remained contained, and Treasury yields declined across the curve.
As Q4 earnings season winds down, results have been solid:
- 370 S&P 500 companies have reported
- 66% have beaten revenue estimates
- 76% have exceeded earnings estimates
- Revenue growth is running +8.9% year over year
- EPS growth is tracking at +12.2%
A strong economy paired with contained inflation may help prevent a deep correction while pockets of overvaluation — particularly in AI-related areas — work themselves out.
However, without AI stabilizing and regaining investor confidence, it is difficult to envision a decisive reacceleration of the broader bull market.
For now, the sideways churn likely continues.
Be well,
Mike