Weekly Market Overview

Money didn't leave the market this week; it just shifted around. The S&P is still less than one percent below its record high, but below that level, the market's composition underwent a thorough reshuffling: assets that had thrived on cheap money were sold, while those that had been punished by high interest rates were bought.

The impetus came from the bond market. The U.S. 10-year yield, which was still at 5.33% in early October, broke through the lower end of its range and fell below 5%. The 2-year yield followed suit, heading toward 4.6%, and the probability of a rate hike in late October dropped to 13%. Fed Chairman Warsh refused to give any indication in Bangkok regarding the two remaining meetings this year, but the market had already drawn its own conclusions.

The stock market’s reaction was clear: investors bought what the interest rate hike had devastated. Consumer stocks were back in favor, especially those of companies with strong earnings, such as Nestlé, L’Oréal, and EssilorLuxottica. Utility companies found buyers again. And in the U.S., homebuilders and regional banks also rebounded.

It wasn’t until this week that it became clear just how hard the AI sector had been hit. The semiconductor index lost 10.5% in a single week and the technology sector fell 7.7%, while the S&P lost barely 2%; memory chips dropped 18.8%, and semiconductors experienced their longest losing streak since 2008. The damage was deepest where the debt lies. Credit insurance on CoreWeave reached a record high of 1,194 basis points, and its bonds—which were still yielding 9% in April—are now yielding over 15%.

The intensity came mainly from leveraged funds. According to figures published by Goldman Sachs on Monday, they reduced their technology positions more sharply in a single week than at any time since the bank began tracking the data in 2016, and their net leverage fell to 48.6%, the lowest level in a year. This involved almost exclusively closing out existing positions, not opening new short positions: not a bet against the sector, but a need to trim the portfolio. Long-short funds sold AI stocks for six consecutive trading sessions, enough to wipe out everything they had built up since early 2025, and the three major leveraged strategies each lost more than 80 basis points on the same day—something that never happened between 2020 and the end of 2025 but has already occurred three times this year. The fact that South Korea also fell 8% and silver dropped 6% tells the rest of the story: those who have to sell aren’t selling what they want, but what they can get rid of.

In Europe, long-term interest rates moved in exactly the opposite direction. The French 10-year yield broke through the 5% mark for the first time since 2002, with a yield spread relative to Germany of more than 160 basis points—the highest since late 2011. More importantly, France is now borrowing at roughly the same cost as the United States—something that hasn’t happened since 2013. While U.S. long-term interest rates fell as growth began to falter, French rates rose because no one can get a budget passed by parliament. Moody’s will revise its rating on Friday, a general strike is scheduled for November 5, and 57.5% of France’s debt is held by foreign investors. Belgium is also feeling the impact, with a yield spread of about 104 basis points—the highest since 2013.

Commodities didn’t help. Brent hit $111.97, its highest level since May, with at least 23 attacks on ships near the Strait of Hormuz this month, and the energy sector closed at a record high. That is exactly the kind of inflation a central bank can’t do anything about. The lesson from this week, then, is that a flat index these days means the opposite of calm. The rotation within the market is more intense than the market’s overall movement, and that makes sector selection more important than the timing of entry.