Insights Chart of the Week

Risk On?

September 22, 2025

Time to Read: 2 minutes

The S&P 500 is trading at record highs, which some investors didn’t see coming after the tariff-fueled drop in April. What may come as a bigger surprise, however, is that the rally is broadening beyond big technology companies. Let’s examine different measures that prove this point.

Ever since early April, when policy uncertainty took the market down around 20%, equity indices have been gaining, hitting all-time highs with notable frequency. The S&P 500 is now around 13% year to date, which some investors didn’t see coming. What may come as a true surprise, however, is that the rally is broadening beyond big technology companies.

Cyclicals are outperforming defensive sectors, indicating that investors are becoming more positive on the outlook. Additionally, high beta stocks — or those that tend to experience larger price swings — are at a year-to-date high compared to the overall market, as measured by the S&P 500. When high beta stocks outperform, it typically signals the market is becoming more bullish. Consumer discretionary is leading staples, suggesting the consumer can remain resilient despite slowing job growth. Lastly, the equal-weighted technology sector is outperforming the average stock. This means technology stocks other than the Magnificent Seven are performing well too, implying a more diversified constellation of companies is gaining.

Together, these signals demonstrate that the market is more positive on the forward outlook. Slowing job growth remains a risk, and we will watch closely in case it spills over into consumer spending. Nonetheless, we believe equities can continue to move higher as the Federal Reserve eases into an improving earnings environment.

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Optimism Grows Among Small Businesses

Small businesses are becoming more optimistic, a positive indication at a time when economists are debating whether growth will slow. We view this confidence as a positive signal for future growth.

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Is Big Tech Overvalued?

It’s true that the S&P 500 currently exhibits high valuations, with the technology sector alone comprising over 40% of its market capitalization and driving concerns about valuations. Are those high multiples justified?

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Positive Signals from Capex?

The One Big Beautiful Bill Act’s provision regarding the full expensing of capital expenditures is already having an impact on companies’ investment plans. We believe this a positive signal for economic growth.

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Cuts Are Coming

Last Friday, Federal Reserve Chair Jerome Powell described a shift in the balance of employment and inflation risks, and the market rallied on the news. For us, nothing has changed. We have been closely monitoring the labor market and indicators of inflation, and we continue to expect two rate cuts this year.

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