Investing.com -- The market-weighted S&P 500 has recently underperformed its equal-weighted counterpart, with year-to-date performance nearly equal after a powerful rally from October 2025 until the Iran conflict began, according to Wolfe Research.

The most recent rally off the bottom has been concentrated, with 10 of the largest technology companies leveraged to the AI buildout theme driving 70% of the S&P 500's return.

Wolfe Research expects this trend to continue as the AI theme remains the most dominant market theme, with such companies offering secular growth into potentially slowing GDP growth later this year.

Growth in major non-U.S. economies is slowing due to persistently higher energy prices, with foreign investors re-allocating money back into the U.S., the firm said.

Investors are pricing in small, albeit rising, chances of a stagflationary environment developing, according to the research.

With mega cap tech earnings coming in solid and adding more fuel to the AI theme, investors are likely to continue to chase the perceived tech winners in semiconductors and memory, among others, Wolfe Research said.