Investors are moving away from Big Tech, but they’re not leaving the stock market. Instead, they are increasing exposure elsewhere. Deutsche Bank strategists noted last week that the average S & P 500 stock is higher since Oct. 29 — the day the benchmark reached its all-time intraday high. That’s despite the index still trading slightly below that mark. “Performance across sectors has been inversely tied to their positioning in late October,” Deutsche said. Indeed, the best-performing sectors in that time are those with the least exposure to Big Tech and artificial intelligence. Since Oct. 29, health care has rallied 6.8% to lead the S & P 500 sectors, followed by a 5.3% gain in financials and a 3.1% advance in consumer staples. Tech, meanwhile, has dropped 6.9% in that time, while communications services has gained just 1.1%. A combination of valuation worries and profit taking has pressured the AI trade of late. This doesn’t mean investors should move out of tech, or the “Magnificent Seven,” completely. “I think your allocation should still remain strong with Mag Seven, but I think certainly healthy to broaden out” exposure, said Thorne Perkin, president of Papamarkou Wellner Perkin. He pointed to financials and health care as areas that look attractive. “I think small caps also are just way overdue. As rates come down, small caps, which are very interest rate sensitive, should participate,” he added. But the recent rotation may serve as a preview of what’s to come in 2026, according to Sam Stovall, chief investment strategist at CFRA. “Despite the pop in prices, the S & P MidCap 400 and SmallCap 600 Indices continue to trade at relative P/E discounts to their 20-year averages of 30% and 35%, respectively, while the S & P Value Index remains 8% below its long-term average versus the S & P 500 . What’s more, rotation into the non-tech cyclicals signals encouraging economic expansion expectations,” he wrote.
