Equity markets are experiencing weakness due to a valuation reset across growth sectors, according to Angelo Kourkafas, senior global strategist at Edward Jones. Kourkafas notes that the significant weight of technology companies in major indices is contributing to broader market underperformance. For years, the market has been led by tech, but the balance of power is shifting as investors move toward more traditional sectors.
Chemicals, transportation, industrials, and businesses tied to real assets are currently outperforming. Meanwhile, many software and IT companies are facing increased pressure. This is due to rising concerns that the adoption of artificial intelligence could disrupt existing business models faster than these companies can adapt.
Speculative assets, such as Bitcoin, gold, and silver, are also experiencing considerable declines. This adds to the prevailing risk-off sentiment in the market. Kourkafas maintains a constructive outlook on the economic cycle, highlighting the ongoing broadening of market leadership.
This rotational environment presents opportunities for diversified portfolios and helps to ease valuation concerns, particularly as technology earnings growth continues to surpass recent price performance, according to Kourkafas.
