These Sectors Can Keep Your Portfolio Afloat Even When AI Fails

By Jim Nelson Reviewed by: Victoria Goldstein

Even with yesterday’s brief rally, the AI trade had a brutal week.

Though it did make something we’ve been discussing a lot over the past few months very obvious.

AI isn’t the entire market.

Though it depends on your definition of the market.

If you are talking about the S&P 500, then yes, AI is very much a big part of the major index.

But if you look outside of AI-focused tech stocks, you can find real winners happily going along for the post-election ride.

Here’s State Street’s five-day sector performance chart, which breaks out each sector of the S&P:

Source: State Street.

This covers the period from Monday at the crack of the morning bell to yesterday afternoon.

You can see far more sectors had a good week right through the election than those that fell.

But those that fell — which all are AI-driven sectors — brought the overall index crashing lower.

Information technology stocks fell the hardest, nearly 14% in just five days.

That was followed by energy, which fell mostly from oil’s own collapse, but also because of the need for electricity associated with the AI buildout.

Then, industrials gave up about 4.5%. Many of these companies supply the parts and equipment to furbish AI data centers.

These three sectors were the primary reason the overall S&P 500 dropped nearly 5% during the week.

You’ll want to pay attention to your inbox tomorrow for the full reason why these sectors took a plunge … and why you might want to consider a contrarian approach over the next few months.

Meanwhile, “boring” stocks like consumer staples, real estate, financials and more did just fine.

Why? They pay above-average income, have far less to do with the backlash AI received by voters on Tuesday and represent industries that we can’t live without.

Is this a major turning point, a pinprick in the bubble? It’s too early to say that with any confidence.

But as our resident bear, Nilus Mattive, has said for months, even if you don’t buy the possibility of AI collapsing, you’ll want to remain diversified.

Weeks like this give you a good example of why “boring” can bring buoyancy for your portfolio.

Of course, there are other ways to play such a wild market. Here’s what your experts have to say …

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As noted, keep an eye on your inbox for a special Weiss Ratings Daily issue from Sean tomorrow.

He’ll discuss the election, the AI trade’s future and much more to get you ready for whatever next week will bring.

Have a great weekend!

Jim Nelson
Managing Editor, Weiss Ratings Daily