AI drives the index, but not most stocks
SPY•The S&P 500 is less than 1% below its record, but about 68% of its stocks were below their 50-day moving average as of October 8. Palumbo Wealth Management’s Philip Palumbo said 30 stocks account for the index’s year-to-date gain, while 211 constituents remain in negative territory.
1. Narrow market leadership
The S&P 500’s strength is concentrated in a small group of stocks, according to Philip Palumbo, founder, CEO and chief investment officer of Palumbo Wealth Management. As of October 8, roughly 68% of S&P 500 stocks were below their 50-day moving average and about 53% were below their 200-day moving average, he said.
2. AI remains a key driver
Palumbo said the index’s entire year-to-date gain can be traced to 30 stocks, each up at least 82.8% this year. Most are technology companies, while others are in energy, industrials and healthcare, and many are tied to artificial intelligence. Investors holding the other 470 S&P 500 stocks would be roughly flat for the year, while 211 index members were in negative territory.
3. Risks and possible support
Palumbo said the narrow leadership is not typically a foundation for a powerful broad-market advance. Lower energy prices or softer inflation expectations could ease interest-rate pressure, he said, while AI-related investment supports employment and consumer spending. He added that government borrowing and data-center construction may keep a floor under interest rates.
