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Fundamental analysis

23.09.202611:16 Forex Analysis & Reviews: Market identifies laggards

The AI technology boom is back. That's evident not only from support coming out of the White House but also from the return of concentration dynamics in the equity market. Since ChatGPT's arrival in 2022, the Nasdaq 100 has consistently outperformed its market-cap-weighted counterpart. That means its rally has been driven by a handful of companies while the rest of the market fails to keep pace. The index's fresh record high reinforces that point.

Nasdaq 100 vs. equal-weighted index dynamics

Half of the Nasdaq 100's five-day gain into the new record came from just five names — Micron, AMD, Nvidia, Intel, and Meta Platforms. Those stocks were rising while 32 other constituents were falling. The picture is classic rotation, driven by two main factors.

First, small-cap names were in favor earlier in the year. In June, the Russell 2000 outperformed the S&P 500 by about 11 percentage points. That gap has now narrowed to roughly 2 points. This reversal reflects waning appetite for rate-sensitive names as futures price in a 54% chance of an October hike and a roughly 40% chance of two tightening moves in 2026. More FOMC officials are voicing concern about persistent inflation, so returning inflation to target likely requires a continued tightening cycle.

Second, there are growing fears that AI advancements will displace parts of the financial sector. AI agents can deliver investment and tax advice and rapidly move capital — a dynamic that could hurt brokerage firms that lose flow. It's therefore unsurprising that Meta's launch of its Muse agent pushed many financial names into the laggard column.

Sector performance within the S&P 500

Good news for the S&P 500 is coming from commodities and fixed income. Oil resumed its rally after US President Donald Trump described UN summit hallway talks with Iranian representatives as "productive," and rumors circulated that Iran might reopen the Strait of Hormuz if the US lifted the blockade. Brent has also been helped by a faster-than-expected restoration of Saudi Arabia's East-West pipeline transit — earlier estimates suggested a seven-week delay.

If Brent cannot sustainably climb above $100/bbl, the upside risk to inflation should ease, and the Fed may not need to tighten policy as aggressively as current pricing implies.

Technically, the daily chart shows that the S&P 500 is forming a 20-80 pattern that could trigger a short-term pullback. However, the underlying bullish trend remains intact, so dips should be viewed as buying opportunities with previously stated targets at 7,830 and 7,980.

*تعینات کیا مراد ہے مارکیٹ کے تجزیات یہاں ارسال کیے جاتے ہیں جس کا مقصد آپ کی بیداری بڑھانا ہے، لیکن تجارت کرنے کے لئے ہدایات دینا نہیں.

Marek Petkovich,
Analytical expert of InstaSpot
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