In finance, there's a saying that a sacred place is never empty. The rotation of securities in investment portfolios is leading to mixed dynamics in stock indices. The Nasdaq Composite is declining, the S&P 500 is inching towards record highs, while the Dow Jones is exhibiting its best performance relative to the S&P 500 since January. Interest in yesterday's leaders is rapidly dwindling, and laggards are transforming from ugly ducklings into beautiful swans.

While women are fighting, it's best not to get involved in the brawl. This is also true for technology companies. In November, Google announced its powerful AI model, Gemini 3, which outperformed the latest version of ChatGPT in benchmark tests. As a result, all those associated with OpenAI suffered. In particular, shares of Oracle, which secured an impressive $300 billion deal with a software manufacturer three months ago, fell significantly. Since then, Oracle's stock has plummeted by over 30%. The company's announcement of higher-than-expected expenses dealt a further blow.

Oracle's Expense Dynamics

The Fed's hawkish rate cut with an extended pause in the monetary easing cycle deprives the S&P 500 of a safety net. The technology sector, with its inflated fundamental valuations, appears to be the most vulnerable. It's no surprise that investors are shedding shares of the Magnificent Seven and turning their attention to banks and even the energy sector.

On the surface, the drop in oil prices makes companies in the oil and gas industry less attractive. Indeed, since the end of 2022, the energy index has risen by only 4% compared to the 79% rally of the S&P 500. It is expected that Brent and WTI will remain under pressure due to record market surpluses in the first half of 2026. However, investors have compelling reasons to buy.

Dynamics of S&P 500 and Energy Index

The fundamental valuations of issuers in the sector, including the notorious price-to-forward-earnings ratio (P/E), are the lowest among all companies in the broad stock index. Even with oil prices in the range of $50 to $60 per barrel, Exxon Mobil has shown it can generate substantial cash flow. Over the past two months, the energy sector has ranked second among the 11 sectors of the S&P 500 in terms of growth rates.

Thus, the rotation of securities in investment portfolios is gaining momentum in the US stock market. With expectations for a traditional Christmas rally and confidence in an accelerated cycle of monetary easing by the Fed under a new chair, the S&P 500 is being pushed towards record highs.

Technically, on the daily chart of the broad stock index, bulls are trying to restore the upward trend. Long positions established on rebounds from fair value at 6,845 and above should be maintained and occasionally increased towards the previously stated targets of 7,000 and 7,100.