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Wall Street's favorite stocks are in their worst slump since 2010: Chart of the Day
Yahoo Finance • • business
Key Points:
- In 2026, S&P 500 stocks with the highest analyst Buy ratings, particularly in AI-related sectors, have underperformed those with the fewest Buy ratings, marking the third-worst such period since 1995, according to Piper Sandler strategist Michael Kantrowitz.
- The AI trade has lost approximately $5 trillion in market value since October 6, including $1.6 trillion on a single day, with major stocks like Nvidia and Alphabet each losing about $835 billion.
- Other large US stocks outside the AI-favored group, including Eli Lilly, Walmart, and Exxon Mobil, have collectively gained about $1.3 trillion during the same period, highlighting a divergence within the market.
- The underperformance of highly favored stocks reflects how crowded trades can limit upside potential and amplify losses when expectations are not met, impacting many investors due to these stocks' heavy weighting in major indexes and retirement funds.
- Historically, only two similar prolonged underperformance periods occurred—in 2001-02 during the tech bubble burst and in 2010 amid the post-financial crisis recovery—suggesting this could signal a significant market turning point.
