Record Number of ‘Negative Beta’ Stocks Show Investors Are Hedging Within the Market

As the financial landscape fractures between artificial intelligence-driven growth stocks and traditional sectors, investors are finding that equities are becoming their most effective shield against market turbulence. According to strategists at Evercore ISI, the count of “negative beta” stocks within the S&P 500 has surged to 130, marking a new all-time high.

Negative beta describes shares that typically move in the opposite direction of the broader market index. Julian Emanuel, a lead strategist at Evercore, noted in commentary shared with MarketWatch that these defensive holdings are heavily concentrated in energy, consumer staples, utilities, and insurance.

This trend mirrors the cautious positioning seen shortly after the dot-com bubble burst, yet Emanuel cautions against interpreting the spike as a sign of impending doom. Instead, he views it as a reflection of how AI-related risks have permeated other asset classes, including emerging-market equities, corporate credit, and bonds. With fewer non-stock options available to buffer against potential unwinding in the AI sector, investors are turning back to the stock market itself for protection.

The data suggests that these negative beta holdings have already provided tangible benefits. They helped cushion the S&P 500 during the selloffs observed in March and again in July, when the momentum trade fueled by AI advancements stalled. Although the hedging effect was less pronounced in September, Emanuel expects negative beta stocks to serve as a vital buffer during future downturns.

For portfolio managers and active investors, beta remains a critical tool for measuring individual stock volatility relative to the broader market. Theoretically, holding assets with negative beta allows investors to offset losses when the momentum-driving stocks powering the index falter.