S&P 500 Near Record While Most Stocks Sit In A Bear Market

The split market everyone is talking about

Here is the oddity: the S&P 500 sits within roughly 3% of its record, yet six in ten stocks in the index are in bear markets. Goldman Sachs' Bobby Molavi, who runs EMEA execution services, highlighted the mismatch and called it a "strange thing."

He dubbed the pattern a "stealth bear market," adding that for the first time he can recall, earnings "were not good enough." A sharp rotation out of AI-linked names has been the driver, pressuring both the megacaps spending heavily on AI and the companies selling into that spend.

How AI spending and cash flow are changing the picture

Molavi said demand is not the problem. Recent results showed Alphabet's Google Cloud revenue doubled, Azure at Microsoft Corp. grew 48%, and Amazon.com Inc.'s AWS rose 39% - its fastest growth rate in five years. In plain English: usage is rising, but the bill is rising faster.

What bothers the market is the cost of AI and the wait for payback, with hyperscalers moving away from cash-gushing mode to a period of elevated outlays that could last beyond a year or two. Collectively, the big four produced $26 billion in free cash flow - far under earlier norms - and are leaning more on a blend of cash, debt, and equity to fund AI infrastructure. Molavi noted that Amazon.com's long-term borrowings rose to $173 billion from $66 billion over nine months.

He characterized last week as the moment the AI capex tab finally hit, with investors favoring realized results over grand roadmaps and cash generation over capex. Capex means capital spending.

When markets feel uneven, the right tools can help investors find clearer opportunities. We're hosting our first ever investor livestream on 11/17 to show you how to use ChatGPT and Claude to invest like a pro, hosted by Briefs Finance CEO Jaspreet Singh. Save your seat.

Market moves, indexes, and credit warning signs

The rotation has been brutal at the top. Since Oct. 15 the Magnificent Seven have lost $4 trillion in market value. On Thursday, Alphabet erased $500 billion - its biggest decline in 20 years - but the S&P 500 slipped just 0.3%, with healthcare, real estate and consumer staples picking up the slack.

Chip stocks did not get that cushion. Monday saw the S&P 500 down 0.5%, its third straight decline, while the Nasdaq 100 slid 1.4% as the tech rotation extended into the new month. Both gauges rebounded in early trading Tuesday.

Molavi flagged credit as the sharper warning. The gap between B and CCC rated bonds has reached 8%, a level hit less than five times since 1996 by his count. In earlier instances, the S&P 500 sat no less than 11.5% under its 52-week peak, and on two occasions was nearly 30% lower. Yet coming into last week, the index sat less than 2% from its high despite that signal. His sign off: "Friday, hold my beer."

What this means for your portfolio

The takeaway is a market where headline indexes mask deeper churn. The index is near a record, but a majority of stocks are not, and investors have been moving out of crowded AI winners into more defensive, less owned areas. Keep an eye on where cash is being generated versus spent and on credit spreads - those have been steering the undercurrent even as the S&P 500 stays within about 3% of its latest high.

Learning how AI augments judgment can quietly sharpen your investing edge over time. On 11/17, our CEO Jaspreet Singh goes live for our first ever investor livestream on how to use ChatGPT and Claude to invest like a pro. Register to join him.