The road to bull-market glory does not run through Walmart and Berkshire Hathaway and Eli Lilly.
There's been a virtual buying panic in traditionally defensive, high-quality stocks over the past few weeks, a near-equal-and-opposite offset to the selling pressure in semiconductors and AI-build-out spenders. The three stocks above — the only members of the $1 trillion market-cap club not in Big Tech – have collectively added $550 billion in market value in the past month, almost making up for what Alphabet has lost.
The Nasdaq-100 and the S&P 500 Low Volatility ETF (SPLV) are rushing toward one another in a satisfying picture of symmetry that nonetheless reflects an almost comical level of tactical rotation executed by an investment community accustomed to playing one factor against another.
While this to-and-fro has so far protected the S&P 500 as a whole from an appreciable setback for months, it has left it stymied around levels that date back to May — before we got two earnings-reporting seasons showing 30% annual profit growth.
A week ago here, I suggested the AI theme was nearing a make-or-break moment to stage a recovery or risk surrendering its leadership status and destabilizing the broader market. Thus far, this trade has failed to respond to moderate oversold conditions or a run of cosmetically strong hyperscaler quarterly results, further loosening its grip on the benefit of the doubt.