By Ahmad Assiri, Research Strategist at Pepperstone
US equities retreated in the latest session as the S&P 500 closed down 1.2% and the Nasdaq 100 lost more than 2%. The selling pressure was concentrated in technology and growth stocks, which had previously led the rally. This pullback reflects investors’ growing preference to lock in profits amid persistent unease over stretched valuations and optimism that appears fully priced in.
Impact on the Saudi Market
The headwinds from Wall Street’s elevated valuations may spill over into the Saudi market. Despite Aramco’s solid earnings and oil prices holding around the mid $60s per barrel, the latest global equity sell off exposed a latent sensitivity to high valuation levels that have gone untested for some time. This recent downswing, the steepest since early October, could translate into mild selling pressure on TASI due to the overall correlation between global equity markets.
While the local market has not benefited from the artificial-intelligence-driven momentum powering Wall Street’s tech sector, the current caution comes after earlier catalysts such as the increase in foreign ownership above 49%, a development that was arguably misinterpreted by the market. The 3.5% decline seen in recent days therefore appears more like a realistic repricing than a deterioration in fundamentals.
This context reinforces the importance of portfolio diversification into international markets. Differing economic cycles and catalysts across regions amplify the benefits of diversification and help smooth return volatility over the medium to long term.
In short, US markets are undergoing a recalibration between past optimism and emerging caution. As buyers step in to defend key technical, the broader picture suggests a phase of natural repositioning rather than the start of a trend reversal.