Market Snapshot is a weekly view from our portfolio managers, offering sharp, thematic insights into the trends shaping markets right now.
This week in numbers
The number of stocks typically held on the MDT US Equity portfolio, significantly more than many active managers.
Google parent Alphabet hit a milestone for quarterly revenue in Q3.
The number of years of US equity data built into MDT’s modelling framework.
Past performance is not an indicator of future performance.
Quote of the week
Our model has found that, for companies with deeply depressed share prices, future outcomes have been positively related to analyst coverage. If the analyst community sticks with a company through a rough patch, that may be a good sign about the prospects for that company’s share price recovering.
Dan Mahr, Senior Vice President, Head of MDT Group, highlights analyst coverage as one of the many factors that feed into MDT’s alpha model.
This week’s Market Snapshot
Has AI market mania reached a peak?
Global equity markets were gripped by fears this week that the AI boom might soon come to a shuddering halt.
- Global equities took a hit this week amid concerns that tech stock valuations were looking stretched.
- Tech giants have underpinned a six-month bull run in 2025. However, investors are questioning the pace of AI investment.
- The S&P 500’s dividend yield currently resembles that of the dotcom era, but this may not necessarily be a reliable indicator of where markets are heading.
Global equities tumbled this week after the S&P 500 Index posted its biggest decline in a month on Tuesday amid fears that the market is heading for a correction following a record-breaking surge in tech stocks.
Investors are questioning whether the pace of investment in artificial intelligence (AI) can be maintained.
US chipmaker Nvidia hit a record high valuation of US$5tn last week – just three months after making history as the first ever US$4tn company – meaning that the value of the AI titan now exceeds the GDP of every country on Earth, except the US and China1.
Nvidia was not the only member of the ‘Magnificent 7’ tech stocks to make headlines while doubling down on the outlook for AI. Meta, Amazon, Alphabet and Microsoft all released their third quarter earnings reports last week, which contained plans for even greater spending on AI-related projects and infrastructure than previously forecast.
Meta revised up its 2025 capital expenditure plans to US$70-72bn from US$66-72bn and said it expected next year to be “noticeably larger”2. Alphabet now expects its spending for this year to be US$91bn and $93bn – up from an estimate of US$85bn in the summer3.
Microsoft’s capital expenditures in the third quarter totalled US$34.9bn, up from US$24bn in the previous quarter.
The AI boom has been a chief driver of equity markets in 2025 and has propelled big tech stocks to record highs. The ‘Magnificent 7’ – Apple, Nvidia, Microsoft, Amazon, Tesla, Alphabet, and Meta – currently hold a collective weighting of around 37% in the S&P 500. These companies accounted for 42% of the index’s 15% total return in the first three quarters of 20254.
Figure 1 shows the performance of a Bloomberg index tracking the ‚Magnificent 7‘ specifically versus the broader S&P 500 index.
Figure 1: Magnificent 7 underpins the S&P 500’s gains
However, fears that valuations are stretched and potentially on course for a correction underpinned a fall in global stocks this week.
On Tuesday, the US blue-chip S&P 500 and the tech-heavy Nasdaq index declined 1.2% and 2%, respectively5. Asian markets followed in their wake, with the South Korean Kospi index closing 2.9% lower the following day, while Japan’s Nikkei 225 was down 2.5%6.
After a brief respite on Wednesday, equities sold off again on Thursday in a round of trading that saw the Nasdaq close 1.9% down. The S&P 500 was down 1.1%, led by Tesla and Nvidia losses. The yield on the 10-year US Treasury fell 7bps to 4.09%7.
Figure 2: Is the S&P 500’s bull run faltering?
At a time when investors are on the lookout for indications about where markets are heading, Daniel Peris, Head of Income and Value Group at Federated Hermes urges caution when it comes to drawing parallels with the dotcom bubble. He notes that any similarities between the S&P 500 now and during the dotcom bubble of the late 1990s, in terms of dividend yield, is a poor indicator of future market movements.
“I would urge dividend investors and those who might be concerned about the equity market’s current valuation to not rely, even slightly, on the S&P 500’s current dividend yield as a measure of valuation or future direction. The index’s roughly 1.1% yield is now for all intents and purposes the same as it was in 2000 at the height of the Internet Bubble. Dividend investors should ignore that fact. The market may be undervalued, it may be overvalued, it may be porridge-perfect – but dividend yield has nothing to do with it,” he says.
“Once upon a time, in a world far away, dividend yield was a useful tool for measuring the broad market (via the S&P 500, created in 1957). By the mid-1990s, dividend yield was already largely irrelevant as an aggregate measure. Investors drove up and rode down internet stocks in the late 1990s without regard to yield at the security or index level. The market’s record-low dividend yield at the time was a coincidental factor, not a causal relation that might explain or forecast market movements. Investors should assume the same now,” he adds.
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