Jessica Rabe

After three straight 20%+ years following a down year, the Nasdaq has historically extended its rally into a fourth year 67% of the time, with an average gain of 5.1% (16.8% when excluding losing years). The current setup matches two prior episodes (late‑1990s and 2019-2021), both of which saw multi-year runs before a Fed-driven bear market. As long as a rate shock is avoided, history suggests the Nasdaq should continue rallying beyond 2026, and pullbacks should be treated as buying opportunities.

Semiconductors have outperformed software by 44 points, a 4-standard-deviation extreme. For tactical investors, this argues for reducing semiconductor exposure (SMH) and looking more closely at software (IGV) as rotation may favor software. For long-term AI believers, an index-weight approach to tech reduces concentration risk.

The S&P 500's 50-day return of 15.3% is a 2-standard-deviation move. Historically, in 5 prior instances, the index was higher 50 days later with an average gain of 7.3%, and even the weakest outcome gained 2.6%. This suggests the broader market still has upside momentum.

The S&P 500 has a 17% overweight to Technology compared to the "Rest of World" index (ACWX). Conversely, ACWX is heavily weighted towards Financials, Industrials, and Materials. Investors face a binary choice: stick with the US "hyper-investment" model or diversify. If the AI capex bet fails to pay off, the "American Exceptionalism" trade (which relies on tech dominance) unwinds. Capital must go somewhere, and it will flow to the valuation discount and cyclical bias of international markets. Long ACWX acts as a hedge against US Tech concentration risk. The recent move (ACWX outperforming US by 11% in 100 days) is statistically extreme (2-3 standard deviations), suggesting a potential short-term mean reversion or pullback before the trend continues.