Why has the stock market been swinging so wildly lately?
Over the past few weeks, the stock market has digested a strong employment report, high inflation numbers, and on-and-off negotiations with Iran. Market volatility has increased with sharp declines and powerful rallies.
Healthy Market Rotations
Recently, many of the AI stocks that had been skyrocketing have begun to pull back, prompting investors to question what this means for the AI rally and the broader bull market. From past experience, investors have learned that a typical pullback is likely due.
Over the past few weeks, on days where profit-taking has weighed on the biggest gainers, investors have seen plenty of rotation into those stocks that have yet to see a massive rally. And even those that have gone down so far in 2026.
Historically, many investors have learned that buying shares of AI and chip companies that have already soared 100% or more since the end of March is risky; instead, they consider buying a handful of best-in-class tech stocks that haven’t participated in the rally.
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Semiconductors
The iShares Semiconductor ETF (SOXX) soared ~95% between March 30 and June 4. The massive run pushed the chip ETF miles above multiple long-term moving averages and to its most overbought RSI levels in the past 20 years (RSI is a momentum oscillator that measures overbought and oversold conditions).
In the past, investors have learned that this backdrop alone likely signals a downturn is due, since the laws of stock market gravity will take over eventually.
Bull Market Fundamentals
Total consensus annual S&P 500 earnings are projected to grow 20% in 2026, on 9.9% higher sales, significantly higher than growth rates of 2024 and 2025. The benchmark is projected to follow this up with 16.7% EPS expansion in 2027 and 15.2% higher in 2028.
The stock market bull case remains firmly intact for the back half of 2026 and beyond, cemented by surging earnings growth throughout the economy and ongoing spending across long-term megatrends such as AI, energy, and reshoring.
AI hyperscalers are projected to spend $600 billion to $700 billion in capex in 2026 and ramp up again in 2027, after spending roughly $400 billion in 2025.
Mark Notes
The key for beginners is to find the best stocks with the greatest potential that have been overlooked but may return to favor as healthy rotations take hold. Given the earnings backdrop, investors are likely to keep buying stocks in June because the bull case remains firmly intact for the back half of 2026 and beyond.
This article is for general informational and educational purposes only. It is not intended as financial advice, investment guidance, or a recommendation to buy or sell any security. The content reflects publicly available information and broad market commentary. Readers should conduct their own research and consult a licensed financial professional before making investment decisions.
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