All that glitters is not gold. For a long time, US equities watched oil, Treasury yields, and FX from the sidelines. The illusion nearly broke in the week to July 10 but ultimately held.

Fresh headlines out of Iran stirred oil, sovereign yields, and FX, and Washington–Tehran relations are becoming more strained — every signal from the region is being parsed by traders. Yet, the S&P 500's response to renewed Middle East escalation was surprisingly muted. Equity investors chose to look forward at corporate earnings rather than backward at geopolitics.

Correlations and sector divergence

According to Barclays, correlations across major asset classes currently sit near the 93rd percentile of their historical range. Oil, bonds, and currencies are moving more in sync than usual. By contrast, correlations within the equity market itself have fallen to their lowest level in more than a decade. Formally, the S&P 500 can still move with other asset classes, but its constituents increasingly diverge. Investors are ruthlessly separating AI winners from losers.

Barclays draws a parallel with the dot-com era, when a major technology shift created unusually wide gaps between favored and unloved names. History does not repeat exactly, but it rhymes.

A clear sign of capital rotation was SK Hynix's IPO. Depositary receipts for the South Korean memory-chip maker jumped by 13% above the offering price. The company raised $26.5bn, the largest IPO by a non-US issuer in history. Data-center demand continues to drive semiconductor pricing.

Volatility in the sector is off the charts. Since June 1, the SOX has recorded 11 moves of 5%+ in either direction. By comparison, there were only 10 such swings in the whole of 2025. The market is clearly overheated around a single theme, and any news can spark violent moves.

That said, broad complacency is not evident. Some corners of the market behave like a casino, but the wider investor base remains sober and sceptical, behaviour that is not typical ahead of a sustained collapse.

Wall Street has already priced in exceptional earnings growth into the S&P 500. The coming earnings season will show whether those expectations are justified. Companies will have to prove that the billions invested in AI deliver real returns.

Technically, the daily chart shows that the S&P 500's rally toward record highs continues. Long positions established at 7,492 make sense to scale up on a successful breach of the local June high at 7,580.