Every AI giant had a bear market. The S&P hid it.

The current bull market remains intact despite bond market nervousness and a cooling momentum trade in AI-related stocks. While rising interest rates create a potential "danger zone" for equities, robust earnings growth—now reaching 20% to 30%—provides a buffer that may allow the market to sustain yields as high as 5.5% or 6%. Market participants are witnessing a rotation into sectors like healthcare and financials rather than a broad sell-off, though the concentration of debt-laden, free-cash-flow-negative companies at the top of the S&P 500 signals a profound leadership transition. Risks persist regarding the circular financing models within the AI sector and the potential for a sudden, broad-based increase in correlation. With the upcoming election and uncertain Federal Reserve policy, investors face a period of heightened sensitivity to volatility, even as equity markets remain calm on the surface.