Five Things You Might Have Missed Beneath the Headlines
Between the midterm elections and the tech wreck, last week offered plenty of reasons for investors to worry. But one development received surprisingly little attention:
The S&P 500 Equal Weight Index quietly closed at a new all-time high on November 4th.
This week, we are highlighting our top five charts that suggest that market leadership is changing, growth is running above potential, the labor market seems to be improving, and the Fed may not be finished tightening.
1. The Average Stock Just Hit an All-Time High.
Despite the gloomy headlines, the broader market has been remarkably resilient. The equal-weight S&P 500 reached a record close on November 4th, even while many large-cap Technology names came under pressure. In terms of Technology, we would encourage investors to zoom out a bit and look at the bigger picture.
Despite the headlines, the S&P 500 Information Technology sector is still slightly outperforming the S&P 500 with a return of 12.4% versus 10.8% for the S&P 500 and is just shy of the S&P 500 equal-weight index return of 15.2%. Technology stocks have had a sharp correction, but not necessarily a terrible year.
S&P 500 Equal-Weight Index vs. Information Technology (Indexed, 12/31/25 = 100)
Sources: Standard & Poor’s, Bloomberg L.P., and Potomac. Data as of November 10, 2026. Investors cannot invest in an index directly. Past performance does not guarantee future results.
2. Technology Breadth Is Improving and the Rest of the Market Looks Okay.
Despite the recent Technology selloff, participation across the broader market remains relatively healthy. As of November 10, nearly 65% of S&P 500 stocks outside of Technology were trading above their 200-day moving averages, compared with just 51% of Technology stocks.
Importantly, Technology breadth has recovered sharply from last week's lows, but the 14-percentage-point gap underscores how much stronger participation remains outside of the sector.
Stronger economic growth may also help explain the rotation in market leadership. When growth is scarce, investors are often willing to pay a premium for companies capable of delivering it. But as economic growth accelerates and earnings opportunities broaden, investors have more places to look for growth beyond Technology.
However, the recent rotation has also had a defensive flavor, with Health Care and Consumer Staples outperforming economically sensitive sectors such as Industrials. This becomes particularly relevant when stronger growth is accompanied by stubborn inflation. The prospect of additional Fed tightening can weigh on growth-stock valuations, even as earnings improve across the broader economy. In other words, stronger economic growth can be good for the stock market without necessarily being good for its previous leaders.
Percentage of Stocks Above Their 200-Day Moving Average
Sources: Standard & Poor’s, Bloomberg L.P., and Potomac. Data as of November 10, 2026.
3. Not One Neocloud Stock Is Above Its 200-Day Moving Average.
Market breadth within the AI space is much weaker than broader tech with our AI basket still showing just about one out of every three AI stocks above its 200-day moving average. This is slightly better than the major technology washouts during the Fed’s tightening cycle in 2022 and the DeepSeek Scare in early 2025, but not by much.
The weakness is particularly pronounced among neoclouds, with none of the six stocks in our basket trading above their 200-day moving averages. Investors are no longer giving every AI-related company the benefit of the doubt as the cost of the infrastructure buildout and political pushback against datacenters in rural areas become central issues.
Eventually, breadth washouts tend to give way to recoveries, but not always immediately. While AI may be the future, the pace at which that future comes may be slowing. That may mean that investor returns will slow as well.
Percentage of AI Stocks Above Their 200-Day Moving Average
Sources: Bloomberg L.P. and Potomac Fund Management. Data as of November 10, 2026. Note: AI breadth measures the percentage of stocks in a custom basket of 36 AI-related securities trading above their 200-day moving averages. The basket includes semiconductor, software, infrastructure, and platform companies. Constituents are fixed as of 2026, and historical results are not based on point-in-time membership.
4. The Labor Market Is Quietly Improving.
Away from Wall Street, there has been a positive development on Main Street. The three-month nonfarm payroll diffusion index, which measures how broadly hiring is across several industries has been showing improvement. This is an encouraging sign that the labor market may finally be improving after a strong stretch of rising corporate profits. See our Profits Without Payrolls for more details.
After falling into the low 40s, the index has now climbed back towards 60. That does not describe a labor-market boom, but it does suggest that hiring is becoming more widespread and the labor market may be stabilizing. This is also consistent with recent gross domestic product (GDP) data showing above-trend economic growth.
We would not pop the cork on the champagne just yet, but things appear to be looking up.
Nonfarm Payrolls 3-Month Diffusion Index (%)
Sources: Bureau of Labor Statistics, Bloomberg L.P. and Potomac. Data as of October 2026. Note: The three-month nonfarm payroll diffusion index measures how broadly hiring is spread across roughly 250 private-sector industries. Readings above 50 indicate more industries are adding jobs than cutting them, while readings below 50 suggest job losses are more widespread.
5. Inflation Is Broadening and the Fed Is Taking Notice.
Longer-term inflation pressures had been moderating, but October’s consumer price index (CPI) print suggested price increases are becoming more widespread again.
While the percentage of consumer price categories experiencing annual inflation above 3% declined to roughly 48% in September, it looks like the percentage may have been higher in October. We say “may have” because inflation data were not collected in October of last year due to the government shutdown so there is no way to accurately compare on a year-on-year basis. We can, however, look at our three-month annualized measure, which jumped from 43% in September to roughly 55% in October. This is not the direction the Fed wants to see.
Combined with signs of improvement in the labor market, these developments lend support to Federal Reserve Governor Christopher Waller's recent warning that a 50-basis-point rate hike may need to be considered in December. Although Waller favored a quarter-point increase ahead of the print, October's 0.3% core CPI reading met the condition he identified for considering a larger move. As a result, fed funds futures are now pricing in an additional 75 basis points of tightening between now and the end of 2027.
That possibility could also act as a headwind to a sustained recovery in Technology stocks, particularly capital-intensive AI companies, even as the broader market shows resilience.
CPI Inflation Breadth: Annual vs. Three-Month Annualized Core Inflation
Sources: Bureau of Labor Statistics, Bloomberg L.P. and Potomac. Data as of September 2026 for year-on-year and October 2026 for three-month annualized.
The Bottom Line
The labor market seems to be improving and the S&P 500 equal-weight index remains remarkably resilient with the average stock still managing to hit an all-time high despite last week's post-election volatility and attention-grabbing headlines. Meanwhile, Information Technology, despite its recent selloff, remains up double digits year to date.
Market leadership may be shifting and broadening inflation pressures could force the Fed to get off the sidelines, but let's not lose sight of the bigger picture: The stock market has had a pretty good year, even if it doesn’t currently feel that way.
Sometimes it pays to tune out the noise, ignore the narratives, and put things into perspective. In other words, take a breath and put on some Mariah Carey Christmas songs already.
