Excess Returns · Saturday, July 11, 2026
Jim Paulsen expresses concern about the extreme bifurcation in the market between "new era" tech stocks and the rest of the S&P 500. He notes that forward earnings for the information technology and communications services sectors have spiked due to AI, while earnings for the other nine sectors have remained relatively flat.
“And I'm also concerned about the bifurcation that's going on in this. And we've talked about this past. I won't spend a lot of time on it. But this is just the taking the S&P 500 and taking the two sectors which make up new era stocks. That's information technology sector and the communications services sector. Their cap weighted, uh, earnings, uh, forward 12 month earnings here.”
“And you can see that the spike that's occurred here of late. A lot of that recently has been AI, but it's just been explosive.”
“But the rest of the S&P, the other nine sectors, their market cap forward earnings, uh, is the red line. And they are up, yeah, they're up a little bit, but they've been pretty flat out there.”