Have you ever watched a party that’s been raging for years and suddenly noticed the vibe changing? The same handful of guests are still in the center of the room, but everyone else is quietly slipping out to the patio where something new is starting. That’s exactly what’s happening in the stock market right now.
I’ve been covering markets for over a decade, and I can’t remember the last time the disconnect felt this stark. On one side you have the “Magnificent Seven” — those mega-cap tech titans that have carried the S&P 500 for the last two years. On the other, you have… well, literally everything else quietly waking up. And according to two very sharp ETF executives I listened to this week, the rotation away from AI darlings has already begun.
The Green Light Almost Nobody Is Talking About
Liquidity is coming back into the system in a big way. The Fed has already cut rates multiple times, and more easing is basically baked in. Historically, when central banks flip from hiking to cutting, market leadership changes. It doesn’t happen with a loud bang — it happens quietly, almost politely, while most investors are still staring at the same names they’ve owned since 2022.
John Davi, founder and CIO of Astoria Portfolio Advisors, put it bluntly: “Whenever the Fed cuts interest rates, usually that’s a turn of a new cycle. Market leadership does tend to change quietly.” He’s not predicting the end of tech — just the end of tech carrying 100% of the load.
“Why do you want to take so much risk in just seven stocks?”
John Davi, Astoria Portfolio Advisors
That single sentence stopped me cold. Because he’s right. The Magnificent Seven now make up roughly a third of the entire S&P 500. Think about that for a second. One third of the most widely followed index in the world is seven names. That level of concentration hasn’t been seen since the Nifty Fifty era of the early 1970s — and we all know how that ended.
Where the Smart Money Is Already Moving
Let’s look at the evidence on the ground. Over the past six months, the iShares MSCI Emerging Markets ETF (EEM) is up 17%. The Industrial Select Sector SPDR Fund (XLI) has climbed 9%. Small caps, value stocks, international developed markets — pretty much everything that spent the last two years in the penalty box is suddenly playing offense.
These aren’t flashy numbers compared to Nvidia’s run, but they’re consistent, broad-based, and — and they’re happening while the Mag 7 is basically flat-lining or giving back gains. That’s classic rotation behavior.
- Emerging markets quietly hitting new yearly highs
- Industrials outperforming tech for the first time in months
- Equal-weight S&P 500 finally beating the cap-weighted index
- Financials and energy starting to wake up
Sophia Massie, CEO of LionShares ETFs, offered another angle. She’s worried we’re pricing in a winner-take-all scenario for AI that may never actually play out.
“I think analysts have an idea of how much value AI will add to our economy. I don’t think we really understand how that’s going to play out between different companies yet.”
Sophia Massie, LionShares
In other words, the market is currently betting that one or two companies will capture almost the entire economic benefit of artificial intelligence. History suggests that’s rarely how transformative technologies actually spread through the economy. Electricity, the internet, railroads, automobiles — every single one eventually lifted hundreds of companies, not just a handful.
Why This Rotation Feels Different (and More Durable)
I’ve lived through plenty of false-start rotations since 2021. “Value is back!” they shouted in late 2021 — only to watch tech roar again in 2022. Same story in 2023. But something feels structurally different this time.
First, valuations. The forward P/E gap between the Magnificent Seven and the other 493 stocks in the S&P 500 is at dot-com-bubble levels. When valuations disconnect this dramatically, mean reversion eventually shows up — sometimes politely, sometimes not.
Second, we’re in a structurally higher inflation environment. Maybe not screaming 9% inflation, but probably not returning to the 1-2% world anytime soon either. In that kind of regime, real assets, commodities, international markets, and cyclical sectors tend to shine. Sitting with 30-40% of your net worth in seven hyper-growth names starts looking reckless.
Third — and perhaps most importantly — the rate-cutting cycle is just getting started. Every major easing cycle of the past fifty years has eventually favored broader participation. It just usually takes 6-12 months for the message to sink in.
How Real Portfolios Are Adapting Right Now
Astoria’s own portfolios have been shifting for months. Davi favors a globally balanced approach: quality companies across cyclicals, defensives, and growth — but with heavy emphasis on reasonable valuations and dividend yield as an offset to inflation.
LionShares is doing something similar — building theme-based ETFs that capture second-order AI beneficiaries (think industrial automation, cybersecurity, data center REITs, and power utilities) rather than betting everything on the pick-and-shovel providers everyone already owns.
Both approaches share a philosophy: diversification isn’t dead — it was just on pause.
What This Means for Regular Investors in 2026
Look, nobody is saying sell all your Nvidia or Microsoft. These are still world-class businesses with long runways. But the marginal dollar — the next dollar you’re thinking about investing today — probably shouldn’t go there.
In my own accounts, I’ve been slowly trimming winners and adding to positions in:
- International developed markets (Japan and Europe are cheap and benefiting from weak currencies)
- Industrial and materials companies tied to reshoring and infrastructure spending
- High-quality dividend payers in financials and energy
- Emerging markets exposure with a tilt toward India and Southeast Asia
Nothing crazy. Just bringing my tech weighting down from nosebleed levels to something that lets me sleep at night if the AI narrative hits a speed bump.
Because here’s the uncomfortable truth: markets rarely ring a bell at the exact top. The shift usually feels boring at first. “Dead cat bounce in value stocks,” people say. “Just a sector blip.” Six months later they’re wondering how they missed a 20-30% move in an entirely different part of the market.
Final Thought: The Party Isn’t Over — It’s Just Getting Bigger
The AI revolution is real and will create enormous wealth over the next decade. But revolutions don’t enrich only the first seven companies through the gate. They enrich the entire ecosystem that grows up around them.
The green light isn’t flashing for the end of growth investing. It’s flashing for the expansion of growth investing — to new geographies, new sectors, new themes.
The question every investor has to ask themselves right now is simple:
Do you want to keep dancing in an increasingly crowded corner of the room… or step outside and see where the next wave is already building?
Because from where I’m standing, the music is changing. And the smart money is already moving with it.
