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In October, investors turned back toward strategies favoring fast-growing companies instead of those with cheaper valuations. As government bond yields declined across Europe, the U.K., and the U.S., the preference for growth stocks became clear. According to Panmure Liberum strategist Joachim Klement, growth stocks are poised to lead performance in 2026 across all three markets, with bond yields—rather than earnings growth—remaining the primary driver. Klement noted that from 2012 onward, U.S. value stocks endured a “lost decade” amid near-zero interest rates, as policymakers kept borrowing costs artificially low to stimulate post-crisis growth. However, following the inflation surge and rate hikes of 2022, value stocks had a strong rebound. That momentum faded in October when U.S. 10-year bond yields slipped below 4%, causing value stocks to lag by 1.9%, regardless of whether measured by price-to-earnings or price-to-book ratios. Income stocks also fell behind by 1.5%, while companies with strong earnings momentum gained 1.4%. Despite the S&P 500 reaching new all-time highs during the month, Klement reported no evidence of market exuberance or excessive optimism. His firm’s sentiment indicator returned to neutral levels, suggesting the U.S. market remains slightly undervalued relative to its fundamentals. Looking ahead, Klement sees growth stocks leading not only in the U.S. but also in Europe and the U.K. The sectors with the most upward earnings revisions in October included resources, banks, and financial services. Taking a longer-term view, he pointed out that historically, the cheapest U.K. stocks and those with high dividend yields have produced stronger returns, though that advantage reversed last month as yields fell. He also highlighted encouraging signs from the U.K.’s IPO market, which is showing life after years of stagnation. In 2025, three IPOs raised £850 million, already surpassing 2024’s total of £600 million. This recovery supports renewed optimism for growth-oriented companies, reinforced by the 1.2% outperformance of momentum stocks in October. In Europe, easing rates—particularly after recent volatility in France—caused value stocks to underperform growth by 80 basis points in October, marking a reversal of the trend that began in late 2021. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

The largest companies in the S&P 500 are seeing their market weight surge faster than their actual earnings — a growing imbalance that’s starting to raise eyebrows on Wall Street. Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, has often dismissed talk of an AI-fueled market bubble. Yet in her latest report shared with MarketWatch, she pointed to one chart that’s giving her some concern. It compares the top 10 stocks’ weighting in the S&P 500 to their share of total corporate profits. According to Calvasina, those companies now make up more than 44% of the entire index — the highest level since at least 1990 — while accounting for just 34.3% of total net income. That nearly 10-point gap echoes levels seen at the height of the dot-com bubble in 2000. “While we haven’t agreed that the market is in an AI bubble like the old TIMT era, the risk has definitely grown,” she said, referring to the Technology, Internet, Media, and Telecommunications boom that preceded the early 2000 crash. The top 10 stocks — including Nvidia, Meta, Broadcom, Microsoft, Amazon, Alphabet (both share classes), Apple, Tesla, and Berkshire Hathaway — dominate the AI narrative. Apart from Berkshire, all are deeply tied to the technology driving the latest market enthusiasm. This trend isn’t entirely new. Since 2021, the biggest companies’ market weight has consistently grown faster than their earnings share, fueled by investor optimism about long-term AI-driven growth — especially since ChatGPT ignited the frenzy in late 2022. But lately, that gap has been widening even faster. The imbalance has resurfaced bubble talk, particularly after recent earnings from AI heavyweights. Meta’s stock plunged last week, wiping out over $200 billion in market value as investors balked at its expanding AI spending plans. Still, strength from other tech giants — most notably Amazon — has helped offset the declines. Amazon’s latest deal to provide cloud power to OpenAI added fresh fuel to the market rally as November began. By Monday’s close, the S&P 500 and Nasdaq finished higher, while the Dow and Russell 2000 slipped modestly — a reminder that Wall Street’s momentum remains powered by its biggest, most AI-focused names. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com