AI Rotation: October brought a sharp divergence, with the Nasdaq 100 falling about -7% while the equal-weight S&P 500 gained 5%. Investors moved toward defensive and quality sectors as scrutiny of AI capital spending grew.
Anthropic IPO: Anthropic’s registration statement gave investors their first detailed look at the economics of a frontier AI developer. It arrived just as markets began asking harder questions about returns on AI investment.
Fed: The Fed held rates at 3.75%–4.00%. A 10-2 vote, with two dissents in favor of a hike, makes a December increase likely, and Chair Warsh announced that some meetings will be devoted to strategy starting in 2027.
Earnings: Third-quarter S&P 500 earnings are tracking close to 30% growth with a high beat rate. The size of the beats is well below average, though, and most of the growth comes from AI-related companies.
Yields: The 10-year Treasury yield peaked at 5.31% on October 5th and ended the month at 4.93%, back below 5%, as AI-driven equity selling pushed investors toward safety.
Hyperscaler Debt: AAA-rated Microsoft issued 30-year bonds at +95 bp, and analysts expect heavy future AI-related issuance. That supply could put upward pressure on longer-term yields.
Equity Market Overview
October was one of the sharpest rotations in recent years. After the largest technology companies drove index gains through late summer, the S&P 500 Equal Weight / Nasdaq 100 ratio fell to its lowest level since April 2000 on October 7. It then reversed hard. For the month, the Nasdaq 100 declined roughly -7%, while the equal-weight S&P 500 rose 5%. Consumer staples, energy, health care, and utilities led, and staples reached all-time highs in the final week. Market breadth improved even on days when the headline indexes fell. This shows the selling was concentrated in AI-related names, not a broad retreat from equities.
November ISS
November ISS
Performance Review & Outlook
Performance Review & Outlook
Equity Market Overview
October was one of the sharpest rotations in recent years. After the largest technology companies drove index gains through late summer, the S&P 500 Equal Weight / Nasdaq 100 ratio fell to its lowest level since April 2000 on October 7. It then reversed hard. For the month, the Nasdaq 100 declined roughly -7%, while the equal-weight S&P 500 rose 5%. Consumer staples, energy, health care, and utilities led, and staples reached all-time highs in the final week. Market breadth improved even on days when the headline indexes fell. This shows the selling was concentrated in AI-related names, not a broad retreat from equities.
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