US SECTORS CALL: Communication Services, Materials & Energy

Investors spent the week worrying about an AI bubble. The S&P 500 slipped by 0.5%, led by a 6.2% drop in Communication Services (MW), which was the worst-performing S&P 500 sector (table). Yet, Information Technology fell just 0.3%. Energy (OW) led the winning sectors with a 1.6% gain, followed by Health Care (OW), up 1.5%.

Bubbles inflate valuation multiples. This year, multiples have contracted. The S&P 500's forward P/E has fallen to 18.6 from 22.2 at the end of 2025 (chart). Information Technology's forward P/E is down to 19.0 from 26.5. Stocks have gotten cheaper this year as earnings growth outpaced stock price gains.