Is the tech euphoria losing momentum? A dangerous concentration of growth is emerging.

The global stock market bull market, fueled by enthusiasm around artificial intelligence, has slowed significantly. Investors are starting to question the validity of high valuations, especially in the technology sector.. Futures contracts on S&P 500 index are down 1%, and on the Nasdaq 100, 1,3%, reversing earlier gains. Palantir, whose shares fell over 4% post-market, despite strong quarterly results and a raised revenue forecast to $4,4 billion, is an example of the deepening concerns. Investors are increasingly pointing to the company's extremely high valuation, with its price-to-earnings ratio reaching 85, the highest level in the entire S&P 500 index.

Dangerous concentration of growth

More and more voices are emerging on Wall Street warning of a possible correction. Morgan Stanley and Goldman Sachs emphasize the dangerous concentration of growth around a few of the largest technology companies and unrealistic expectations related to the commercialization of AI. It's worth noting that even small price declines following the publication of financial results may indicate not so much weak fundamentals, but rather overestimated market expectations.

Negative sentiment also spread to Asian and European markets. In Asia, stock indexes fell by an average of about 1%, with the technology sector recording its biggest one-day decline since SeptemberEurope is also expected to open lower, reflecting a global correction in sentiment. DAX futures fell more than 1,2% from yesterday's close just before 9:00 AM.

There is no guarantee of a reduction in interest rates

Uncertainty about the future path of monetary policy in the US is further affecting marketsFederal Reserve members' statements are divergent – ​​Chairman Jerome Powell emphasized that there is no guarantee of a December interest rate cut, while Austan Goolsbee of the Chicago Fed expressed greater concerns about inflation than the labor market. Lisa Cook and Mary Daly, on the other hand, point to signs of a weakening labor market, though Daly emphasizes that decisions must be made with an "open mind."

In the US, manufacturing remains stagnant, with October marking the eighth consecutive month of decline in industrial production. A strong dollar, with the dollar index (DXY) hovering near its highest level since August, is further impacting export conditions. Gold prices fall for a third consecutive day and oil prices weaken after OPEC+ decided to halt plans to increase productionIn the currency market, the Japanese yen gained after further warnings from Japan's finance minister, fueling speculation about possible government intervention. Meanwhile, the Australian dollar weakened following the decision Rebuildables to keep interest rates unchanged, which also resulted in declines in stock market indices in Australia.

Source: Krzysztof Kamiński, OANDA TMS Brokers