Wall street hits new highs, but the market grows wary of risks

The U.S. stock market is showing strong momentum this October: tech giants are pushing indexes to new peaks, while hopes for a softer Federal Reserve policy are keeping risk appetite alive. Against this backdrop, the S&P 500 and Nasdaq remain near historic levels, while the more conservative Dow Jones moves cautiously due to weaker performance in the «old economy». Investors are celebrating records yet listening closely to warning signals: the stronger the rally, the more the market demands proof of profit sustainability and earnings quality.

Tech momentum and the rate factor

Technology remains the leading sector — from chipmakers and server solution providers to cloud platforms driving the expansion of computing power for artificial intelligence. A steady stream of corporate updates on AI projects, data-center investments, and infrastructure power supply continues to concentrate demand within the «new economy». The scale effect is evident: even neutral management comments about capacity utilization help support valuations because the market is pricing in a long demand cycle.

Another key driver is monetary policy expectations. Traders carefully analyze the regulator’s signals and macro data — core inflation, labor-market trends, and consumer activity all directly affect the cost of capital. The market narrative increasingly revolves around the phrase «higher for longer, but with room for a pause», and any hint of looser funding conditions immediately boosts demand for growth stocks.

Correction risks

Alongside record highs, the discussion about risk pricing is intensifying. Rapid multiple expansion in megatech is outpacing the actual monetization of AI solutions, making the earnings season a turning point: the market forgives investment in scale, but demands clear trajectories for revenue and free cash flow. Any weakness in forecasts instantly hits share prices — sell-offs often ripple through entire value chains, from chips to software.

At the forefront is a mix of factors that increase the likelihood of a «cool-off» after the rally:

• accelerated re-rating of tech leaders based on future-profit expectations;
• heightened sensitivity to U.S. macro data and central-bank commentary;
• fiscal risks and the bond market’s impact on funding costs;
• geopolitical uncertainties reshaping capital flows;
• competitive and regulatory pressure within the AI sector.

Even within an upward trend, such shocks can trigger sharp intraday moves, when individual names lose double-digit percentages on news of delayed projects or revised investment plans. As a result, investors now focus on backlog quality, client commitments, and project-delivery timelines.

Sectors and drivers

Despite record index levels, growth remains uneven. The fastest movers are companies embedded in AI-infrastructure logistics: a «computing-module supplier» or a «high-density data-center operator» gain an edge through multi-year contracts. Businesses surrounding this infrastructure — from cooling-system manufacturers to power-distribution and software-management providers — are also strengthening their positions.

The «old economy» shows a mixed picture. Consumer brands benefit from steady niche demand but remain sensitive to credit costs; industrial firms depend on clients’ investment cycles; and financial institutions track margins shaped by the yield-curve profile. The result is a market driven by quality stories rather than broad-based growth — where every misstep can be costly for both sides.

Strategy for private investors

Even at record highs, private investors still have tools to manage uncertainty. It’s important to decide in advance what portion of the portfolio to keep in growth stocks and how to offset short-term volatility. Equally essential is matching corporate expectations with the reporting calendar — earnings and forecast updates often become turning points for sentiment.

A practical checklist for the current market phase may include:

• define position size and acceptable loss before entering a trade;
• diversify exposure within the AI value chain (hardware, infrastructure, software, energy-intensive services);
• evaluate the price-to-cash-flow ratio rather than just price-to-revenue;
• monitor key U.S. macro indicators that shape rate expectations.

This approach doesn’t exclude participation in the trend but reduces the chance of a portfolio collapse after a single bad release. With the overall uptrend intact, risk discipline becomes the defining skill of the season.