The opening lyrics to Buffalo Springfield’s hit song For What It’s Worth in 1966 seem appropriate to describe the equity markets after just 2 months into the new year. While the S&P 500 Index is basically flat on the year, the market has rewarded a new set of stocks from those that dominated the past 3 calendar years. The “Artificial Intelligence (AI) scare trade” is disrupting groups of stocks in different sectors or industries seemingly on a weekly basis. Software stocks are the poster child of the threat that AI can replace those companies’ offerings at a much lower cost. Insurance companies, property managers, wealth managers and logistics firms have also been cast as vulnerable to AI disruption and have seen their stocks take a hit on AI fears. Asset-light business models, the belle of the ball all these years, have suddenly been considered the most susceptible to disruption. Asset-heavy sectors, with higher debt levels and lower profit margins, are rallying and leading the market year-to-date.

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