The S&P 500 remains near record levels, but sharp sector swings are emerging as artificial intelligence fears ripple across financial services, real estate and transportation stocks. Investors are grappling with what one strategist calls an “AI scare trade,” as markets react quickly to headlines about potential disruption.
BNN Bloomberg spoke with Craig Basinger, chief market strategist at Purpose Investments, who said recent price moves reflect short-term overreactions and fragile sentiment, even as global earnings growth and international markets present selective opportunities.
Key Takeaways
- Artificial intelligence headlines are triggering rapid selloffs across sectors as investors question the durability of traditional business models.
- Recent declines in trucking, wealth management and real estate stocks reflect what some see as short-term overreactions rather than fundamental shifts.
- Market leadership has rotated, with both defensive and cyclical sectors outperforming tech in an unusual pairing that signals fragile sentiment.
- After three strong years for equities, a more defensive posture is emerging as investors respond to heightened volatility and cooling risk appetite.
- International developed and emerging markets continue to attract interest on broader earnings growth, fiscal spending support and relatively attractive valuations.
Read the full transcript below:
ANDREW: The S&P 500 was boosted yesterday by gains in tech. But our guest says fears over how AI could disrupt entire industries and upend long-standing business models have the market bouncing from one sector to another. This past week, he says, wealth services, real estate firms, insurance brokers and trucking were all the latest victims of what he calls the AI wrecking ball.
We’re joined by Craig Basinger, chief market strategist at Purpose Investments. Thanks very much for joining us.
CRAIG: Thanks for having me.
ANDREW: I love that — a wrecking ball. I think it was a Miley Cyrus song. But you reckon that AI — of course, we don’t know what impact it will have — across industries, we’re seeing these fears spread?
CRAIG: Yeah. From our perspective, we do think it’s an overreaction in the short term. There’s no question that AI productivity gains, especially when it comes to coding, are pretty incredible. But trying to extrapolate those kinds of gains into all these other industries, I think, is a bit more challenging.
The narrative has taken hold in this market. As soon as any headline comes out that AI is going to have an influence on any given industry, the market is running out and selling down the names, questioning the longevity of their business models.
ANDREW: You supply an interesting example here — the trucking industry. A Florida company called Algorhythm Holdings said its service has improved freight volumes radically for its clients, and you say that contributed to a selloff in trucking stocks?
CRAIG: Yeah. And this company — listen, maybe they’re doing some great things, so I’m not going to dig that deep into it — but it wasn’t that long ago they were selling karaoke machines. Even in more recent quarters, their revenue was pretty minimal.
I think it highlights just how sensitive this market has become. That’s really been one of the themes this year. If you look at the S&P, it’s pretty close to its all-time high. Same with the TSX. But the gyrations under the hood have become a bit unnerving.
Whether it’s AI, whether it’s gold going up $1,000 and down $1,000, we’re seeing some really material moves that are characteristic of a market that is probably more fragile than it appears on the headline number.
ANDREW: The broad market is more fragile, you mean?
CRAIG: Yeah, and investor sentiment. Selling off $70 billion worth of trucking stocks because AI is going to help — it just seems like a dramatic overreaction.
The productivity gains and use cases on the AI side are phenomenal. We’re using it quite a bit. But historically, markets overreact in the short term and underreact in the really long term. I think right now we’re probably in a bit of that short-term overreaction.
ANDREW: Insurance brokers — I guess if I’m shopping for a policy, AI might make it easier to compare what’s out there. I wouldn’t want to trust it absolutely, but it could give me some useful leads.
CRAIG: Yeah, but there are already websites that do that. It is interesting how people are extrapolating that they won’t need a real estate agent anymore, or that trucking is going to solve all the logistics problems.
They’ve been using machine learning and other AI-type tools in trucking for a long time to optimize routes and loads. I think it’s the mentality of the market. A lot of fast money is rushing around — either shorting or exiting — and that’s creating pockets of volatility.
ANDREW: Right. We’re showing Mullen Group — not necessarily caught up in the selling because of this Algorhythm name — but it’s an example of a prominent Canadian trucking stock. Real estate — what is the fear there about disruption from AI?
CRAIG: Everybody’s guessing what it could mean. On the real estate side, it’s that AI could help find a house, close deals, do paperwork and take care of all of that — things you would normally pay a hefty fee for.
A better trucking example would be TFI International. Mullen is a good trucking company, but it’s more focused on the energy space, so there may be other factors at play.
Shopify keeps oscillating in huge moves up and down, and people are fearful that online shopping could change going forward. The market is overreacting in the short term in a lot of these names and possibly creating opportunities.
We actually purchased TFI a few days ago on the weakness in trucking late last week. That said, we’ve had three great years in the markets. We could have a fourth — the economy is decent and there’s a lot of good things going on — but four strong years is getting up there.
One of our themes is to protect what you got after three years of outsized gains. We still see pockets of opportunity, more on the international side, but we have a bit more of a defensive tilt.
ANDREW: You’re still interested in international developed and emerging markets. Tell us what you’re thinking there.
CRAIG: We had a pretty big overweight in our multi-asset strategies a few years ago, and last year it worked out exceptionally well and drove a lot of the relative performance.
International markets are typically cheap relative to the U.S., but it used to be apples and oranges because earnings growth was much stronger in the S&P than in Europe, Japan or Canada. What changed last year was that earnings growth broadened globally. That drove a lot of the performance.
As we roll into this year, earnings growth is still positive. There’s still a valuation discount. Many of these markets are what we call fixer-uppers. They’re increasing fiscal spending on infrastructure and defence, which is market-friendly.
Japan, in particular, is improving corporate governance and discouraging cross-ownership structures, becoming more shareholder-friendly. Those changes can have lasting impacts on valuations.
Japan has been the star so far this year, up about 13 to 14 per cent year to date, leading the way.
ANDREW: Maybe we could put up a one-year chart for TLT, the ETF that tracks long-term U.S. bonds. Investors have been swinging into bonds lately. Is that simply because money has been coming out of tech and looking for a home?
CRAIG: Recently — over the past week or so — yes, there’s been a bit of a risk-off appetite. People are putting more money into fixed income.
I wouldn’t use TLT as the example because once you go that far out on duration, you’re dealing with a different kind of animal. But there has been a shift into defensives, including bonds and defensive equities.
So far this year, cyclicals and defensives have been leading while tech has been moving lower. That’s very different from previous years. It’s those sectors helping hold up the headline number.
But it’s unusual. Cyclicals and defensives don’t typically travel together. The fact that both are rising is another sign that the market is a little squirrely and that investors should lean a bit more defensive.
ANDREW: And on that theme, you say swings in precious metals — silver shooting up, then coming down — and bitcoin collapsing by about 50 per cent point to a jumpy market.
CRAIG: On the bitcoin side, it’s halved, and not in one of its official halvings — this one’s price-related. Bitcoin is still a bit of the tip of the spear for risk appetite. Its decline reflects cooling risk appetite.
On gold, we still own bullion, though we reduced a bit last year. When gold goes up $1,000 in a week and down $1,000 in a day, that’s not healthy.
We historically owned gold for crisis alpha — when everything breaks down, gold rises to the rescue. I don’t think that’s what gold is anymore. It’s become more of a momentum trade.
That doesn’t mean it can’t keep going up, but it’s detached from fundamentals. It’s delivering alpha, but it’s no longer a defensive diversifier at this point.
ANDREW: Thank you very much indeed, Craig. Craig Basinger, chief market strategist at Purpose Investments.
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This BNN Bloomberg summary and transcript of the Feb. 19, 2026 interview with Craig Basinger are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
