COMMENTARY:
- This week the S&P500 index fell almost 3% and was mainly a tech-/AI-led pullback week. The big, highly concentrated gains in AI earlier in the year left the market vulnerable to profit-taking. Also Fed-policy ambiguity and mixed economic datapoints added to risk aversion. In addition, Crypto and risk-off flows caused big moves in bitcoin (multi-month lows/volatility) and other crypto-sensitive stocks also contributed to risk aversion. There were, however, Defensive spots — notably pockets of healthcare and a handful of strong retail earnings — provided some offset, but not enough to overcome the weight of large tech names that underperformed.
- The tech sector’s ~-5% weekly drop reflects a crowd-shift out of high-growth tech in favor of caution: valuations under scrutiny, rate-cut hopes dampened, momentum reversed. For investors, this suggests that even though earnings may be strong, the risk pivot is shifting toward whether future growth and profitability justify the current valuations — especially in AI/semiconductor names. NVIDIA (-5.9%) – Despite strong earnings beat, reversed sharply, and broad concerns about AI spending and valuations weighed on NVDA. Its outsized weighting means its decline is a meaningful drag. Oracle (10.8%) fell ~5.7% on Friday alone, and down more than 40 % from its peak in recent months. That makes it a substantial contributor to tech-sector weakness.
- The energy segment fell (~2.9%) due to oil price softness, demand and macro worries, and weak sentiment in cyclical commodity-sensitive names. The “big three” constituents in the space pushed the index down; Exxon Mobil (-1.9%): ~23% weight. Chevron (-4.9%): ~17% weight. ConocoPhillips (-4.4%): ~6% weight. Economic signals pointed to weaker demand growth and more cautious sentiment (including consumer confidence) which bodes poorly for energy demand.
- Only three sectors had positive performance this week, Healthcare (+1.8%), Consumer Staples (+0.8%), and Communication Services (+0.5%). The week’s action signals a shift in market risk preferences: investors are moving away from speculative momentum and refocusing on valuations, profitability, and sector resilience given macroeconomic and policy uncertainty.
ETF Tidbits:
ETF Market Themes this week:
-Record ETF Flows and Segmentation: U.S.-listed ETFs have surpassed their annual inflow record with over $1.2 trillion in net new assets, driven by price-based market segmentation. The low-cost core segment remains dominant, but high-cost leveraged, buffer, and options-driven ETFs are seeing intense growth, as are active fixed income strategies.
-Crypto and Volatility: Crypto-tied ETFs, especially those linked to Bitcoin, are experiencing notable outflows and volatility after recent price declines. This has contributed to risk-off sentiment and sector rotation across the broader market.
– Options-Driven and Leveraged ETF Expansion: Options-based ETFs have rapidly gained traction with $170 billion AUM, and half of the existing products launched in the past two years. Leveraged, inverse, and high-yield options income ETFs are among the most active areas for new product launches.
