The US equity market has split into two distinct trajectories as a concentrated selloff in high-growth tech stocks neutralized gains across the broader market. Between Oct 6 and Nov 5, the S&P 500 fell 5.9%, but the decline was entirely driven by the technology sector and the Magnificent 7, which dropped 16% during that period. Had those 78 constituents been excluded, the index would have gained 6%. This trend was mirrored in the Russell 1000, where the average stock rose 0.76% over the last month despite the total index losing $4.8T in market capitalization.
The decline is centered on the artificial intelligence trade, with semiconductor stocks falling roughly 40% from their peak this year. This shift has triggered a pivot toward defensive assets, with investors piling into health care, utilities, and energy. As volatility increases, Goldman Sachs recommended shorting the US dollar against the Japanese yen to hedge against further AI-driven equity declines. The fragility remains beneath the surface of the S&P 500, where 60% of stocks are currently in bear market territory.
