INSTITUTIONAL investors are rotating capital into fixed income after equity markets repriced growth expectations on mounting concerns about the U.S. economy's dependence on artificial intelligence spending.
The Nasdaq Composite fell 2.9 percent to 25,437, the S&P 500 declined 1.8 percent to 7,580, and the Russell 2000 dropped 1.7 percent to 2,812. The selling reflected a broader reassessment of valuations concentrated in mega-cap tech names.
Longer-dated Treasury yields compressed as demand spiked, signaling a flight to duration. The move reverses weeks of bond selling and repositions portfolios away from the narrow set of stocks that have driven market performance since late 2023.
The rotation exposes a structural vulnerability: if AI-related capital expenditures decelerate or prove less accretive than priced, broader economic growth could stumble. Credit spreads face widening risk if earnings disappointments extend beyond the technology sector.
Investors are now stress-testing portfolios for over-concentration in growth equities, a reversal of the momentum that dominated early 2024.
