Something unusual is happening beneath the surface of the S&P 500. While the equal-weight index keeps printing new highs, the stocks inside it are moving less in sync than at any point in modern market history.
Goldman Sachs equity strategist Ben Snider flagged the divergence in a July 17 research note, highlighting that the three-month implied average stock correlation across the S&P 500 has fallen to a record low of 0.14. For context, a correlation of 1.0 means every stock moves in lockstep. A reading of 0.14 means the index’s components are essentially doing their own thing.
AI momentum is breaking down
The catalyst is a violent rotation away from AI-related trades. After months of AI-themed stocks juicing broader market returns earlier in 2026, the trade has reversed sharply in July. Capital expenditure concerns and sector rotation triggered steep pullbacks among the most popular AI momentum names.
Goldman’s Momentum factor, which tracks the performance of stocks with the strongest recent price trends, saw its annualized volatility spike to 36% over the trailing three months. That’s the highest reading outside of a recession in 45 years. The correlation between Goldman’s AI basket and the S&P 500 AI index has turned negative, meaning the two groups are now moving in opposite directions.
