Investors are moving away from Big Tech, but not from the stock market. Instead, they are increasing their exposure elsewhere. Deutsche Bank strategists noted last week that the average stock price of the S&P 500 has risen since Oct. 29, when the benchmark hit an intraday high. That’s despite the index still trading just below that mark. “The performance of the sector as a whole is inversely related to its position in late October,” Deutsche said. In fact, the sectors that performed best at the time were those with the least exposure to Big Tech and artificial intelligence. Since Oct. 29, Healthcare has risen 6.8% to lead the S&P 500 sector, followed by Financials with a 5.3% gain and Consumer Staples with a 3.1% gain. Meanwhile, the high-tech industry fell by 6.9% during this period, while communications services rose by only 1.1%. A combination of valuation concerns and profit-taking is putting pressure on AI trading these days. This doesn’t mean investors should completely retreat from technology or the Magnificent Seven. “Although the allocation to Mag Seven should remain strong, we certainly think it’s healthy to increase exposure,” said Thorne Parkin, president of Papamarchow Werner Parkin. He cited finance and health care as areas that look attractive. “I think small-cap stocks are also premature. As interest rates come down, small-cap stocks, which are very rate-sensitive, should also participate,” he added. But the recent rotation could be a harbinger of what’s to come in 2026, said Sam Stovall, chief investment strategist at CFRA. “Despite the surge in prices, the S&P MidCap 400 and SmallCap 600 continue to trade at a relative P/E discount of 30% and 35% to their 20-year averages, respectively, while the S&P Value Index remains 8% below its long-term average relative to the S&P 500. Additionally, the rotation into non-tech cyclical stocks is a signal encouraging expansion expectations.”
