By Teresa Rivas
If all's well that ends well, then investors have nothing to worry about. Yet if the journey matters as much as the destination, then there could be cause for concern.
When it comes to the market, just looking at the final figures is reassuring: The S&P 500 is up more than 10% this year, and off less than 1% from its all-time closing high, notched just two weeks ago. The Nasdaq Composite of course has done even better.
Yet lifting the hood tells a different story: Just three days after the S&P 500's record high it suffered its worst percentage decline since last October, and the Nasdaq saw its largest one day point decline on record, followed by its second highest volume day of the year a few days later. Get ready for the summer of big market swings.
That volatility is worrying for Stifel Equity Market Strategist Thomas Carroll, because it could be indicative of a bull market top. Recent activity could be taken as a sign that "this bull market has transitioned into its explosive later stages, where price and volatility climb together rather than apart," he writes on Tuesday.
Not surprisingly, artificial intelligence is the culprit.
"Today's signs of excess are concentrated in the AI scarcity trade, now roughly 24% of the S&P 500, where semiconductor prices and volatility are rocketing higher in tandem and dragging the Nasdaq 100 (45% of which is now in semis and hardware) along for the ride," Carroll writes.
We've seen this play out before. He likens it to commodity scarcity, which can drive up prices and volatility, before ending when calmer conditions prevail.
The Cboe Volatility Index, or VIX, isn't as high as it was in the immediate aftermath of the Iran war's start, but spiked more than 40% from June 4 to June 10, ending a roughly two-month lull and reaching its highest levels since early April.
Carroll's other concern is that stock dispersion (when individual stocks see bigger swings than the overall market) is at all-time highs.
"Peak dispersion is extremely effective at calling rotations out of mega caps into equal weights," he writes.
So if dispersion reaches a top and AI scarcity fades, the S&P 500 could feel the pain as the primary engine of the bull market fades. AI-related names have beaten non-AI names by 81% since the end of 2024, so without their leadership it will be hard for the index to keep advancing.
Capital Economics Senior Market Economist James Reilly made a similar point from the valuation side on Tuesday, writing that stocks globally and in the U.S. have been pushed up by expected earnings for tech, meaning "stocks in places most exposed to AI look expensive versus their peers and at risk of underperforming if enthusiasm for AI wanes."
No wonder big market swings might make some investors feel queasy.
Write to Teresa Rivas at teresa.rivas@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 16, 2026 13:21 ET (17:21 GMT)
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