Concerns have started to grow about US equities as Wall Street has been losing more ground.
The S&P 500 has shed 1.4%: its biggest weekly drop since November 2025, with The Dow down 1.3% while the Nasdaq underperformed by ending 1.55% lower. The Russell 2000 abandoned 2%.
One reason cited has been attributed to fresh risk aversion fuelling doubts over large growth stock leadership.
The big worry has to be: is this a sign of things to come? If so, institutional investors need to take heed.
Tech and AI had lifted indices to start the week but by the end of the period saw investors rotating towards defensive sectors as volatility rose.
Precious metals continued to see-saw, with gold briefly rising before falling back.
“These movements reflected both a search for safe havens amid geopolitical and budget uncertainties and also profit taking after a strong rally,” said Benjamin Melman, global CIO at Edmond de Rothschild Asset Management. “Macro data bolstered the economic normalisation scenario with consumption running out of steam and the labour market holding up.”
Looking at the Federal Reserve, several Fed members: Hammack, Logan, Schmid and Miran remained cautious, arguing for close-to-neutral monetary policy, but no acceleration in rate cuts as long as the trend towards 2% was not clear enough – a worrying snapshot in itself.
In the background, budget and trade debates – a deficit expected to come in at 5.8% of GDP and tensions over Iran tariffs – fuelled political and geopolitical uncertainty.
In sector developments, there has been mounting concerns over AI disruption and doubts over the sustainability of some traditional business models.
Financials, for example, tumbled 4.7% with brokers, asset management companies and insurance brokers faring the worst.
Marsh & McLennan shed 6.3%, Aon 8% and Arthur J Gallagher 15.2% on worries that traditional broking profitability would be hit by increasing use of AI-driven advisory, pricing and risk-management solutions.
Healthcare was also down 1.1% with selling focusing on Contract Research Organisations and some wholesale distributors on fears of disruption in clinical research and data collection/processing activities.
Industrials edged 0.25% lower but there were some marked falls in logistics and haulage companies.
“Markets expect to see increased pressure on traditional intermediation models,” added Melman. “Increasingly powerful freight optimisation tools using AI could eventually boost competition within the sector.”
As a result: “Investors began to rotate towards more defensive segments offering better visibility and returns and less exposure to technology disruption,” said Melman.
Anthony Willis, senior economist at Columbia Threadneedle Investments, also noted: “Large cap tech names have sold off and value has outperformed growth. Small caps have generated much improved returns.”
What then has driven the moves?
“Investors are increasingly concerned around returns generated by AI-related capital expenditure,” added Willis. “Tech capex is set to be in the region of $660bn over the next 12 months – much more than expected.”
“Clarity around AI winners and losers will take time to emerge,” added Willis. “In the meantime, investors are beginning to look more broadly for opportunities.”
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