Retired strategist Jim Paulsen argues that many market sectors are now less tied to technology stocks than they were during the dotcom boom, potentially limiting the impact of an AI-stock decline. He also cites elevated valuations, narrow leadership and investor complacency as risks.
The Dow rose about 0.9%, the S&P 500 was slightly higher and the Nasdaq dipped. Healthcare led S&P 500 sector gainers, while energy was the weakest group. The 10-year Treasury yield fell to about 5.10%.
In a Thursday note, Paulsen said the price sensitivity of the S&P 500’s “Old Era” sectors to “New Era” technology and communications stocks had recently fallen to roughly zero. He noted that during technology and AI selloffs this year, many other sectors continued to advance.
Paulsen said low-volatility and dividend-focused stocks, as well as value, small-cap and mid-cap shares, appear less dependent on technology leadership than they were near the dotcom bubble’s peak. He also pointed to elevated valuations, narrow market leadership and investor complacency, while arguing that a decline in AI-related stocks would not necessarily cause a broad selloff like the one after the dotcom bust.
