If you only looked at the headlines, you might believe not much has changed in the stock market over the past few months. At the end of last week, the S&P 500 Index was about where it was in late October.

However, that conclusion would be erroneous. The fact of the matter is that a lot has changed in the stock market over that span.

The evidence for that claim can be found in the performance of the index itself, as measured two ways. On a cap-weighted basis, the State Street SPDR S&P 500 ETF Trust (NYSE: SPY) has gained almost no ground this year.

That’s because the top five stocks that comprise the cap-weighted version of the index account for roughly 25 percent of its performance. Those companies are NVIDIA (NSDQ: NVDA), Apple (NSDQ: AAPL), Microsoft (NSDQ: MSFT), Amazon (NSDQ: AMZN), and Alphabet (NSDQ: GOOGL).

Until recently, that was a winning formula. Those stocks powered the SPY to a 47 percent gain over the past two calendar years as Wall Street pumped money into just about anything having to do with artificial intelligence.

Three Key Points

When all 500 (or so) stocks in the index are treated the same, a different story emerges. While the SPY was up 0.8 percent last month, the Invesco S&P 500 Equal Weight ETF (NYSE: RSP) appreciated more than four times that amount in January.

That may not seem like much of a change, but the implications of this recent pivot away from AI are enormous. Among them are these three key points:

• First, it means that Wall Street is not abandoning the stock market altogether. If it were, then the RSP would also be flat this year.
• Second, it means that Wall Street now sees value in other sectors of the economy that it previously shunned. If it did not, then it would sell tech stocks and sock away that money in cash or bonds.
• Third, it means that Silicon Valley will no longer be the center of gravity for the stock market. Instead, Wall Street will take a much broader view of the economy.

Follow the Sectors

A momentum-driven stock market does not leave much room for analysis. All you have to do is jump on board the bandwagon and enjoy the ride!

If you are an index investor, then that type of market is exactly what you want. You enjoy high returns without having to do much work.

But now that the AI bandwagon ride is coming to an end, it’s time to get back to work. The critical question to think about is this: If Wall Street is going to be moving a lot of money out of momentum stocks, where are they going to put it?

To answer that question, it helps to look at what they have been doing lately. In January, Energy was the top performing sector of the index, followed by Materials and Consumer Staples.

The worst performing sector was Financials, with Technology and Healthcare also posting negative returns. In the middle were Industrials, Communication Services, Real Estate, Consumer Discretionary, and Utilities.

I would put an asterisk next to Energy since that sector’s performance is highly influence by oil prices. But the emergence of Materials and Consumer Staples is meaningful since they are more cyclical in nature.

Going for the Green

I have been waiting for this day a long time. Over the decades, I have developed a stock selection process that works very well when value is in play.

Already, it has delivered some impressive results. Last week, I closed out an options trade that gained 197 percent in just three weeks.

On January 15, I recommended buying a call option on The Greenbrier Companies (NYSE: GBX). A call option increases in value when the price of the underlying security goes up.

At that time, GBX was trading below $50 after releasing quarterly results that were better than expected but failed to excite Wall Street. However, my system told me that GBX was undervalued and likely to rally soon.

On February 5, I closed out that trade after GBX rose above $53. That day, the call option that we could buy three weeks earlier for $1.50 was selling for nearly $4.00.

Get Off the Bandwagon

The Greenbrier Companies manufactures railroad cars for commercial freight operators. That is about as far removed from the tech sector as a company can get.

That’s my point. The same businesses that Wall Street eschewed over the past two years as being too mundane are the same ones that it now finds compelling.

For index investors, that is bad news. While the SPY may show little gain this year, some of the companies that comprise the index will be making big moves.

But for investors with a reliable system for identifying those stocks before Wall Street gloms onto them, this year could be hugely rewarding. All you have to do is get off the bandwagon and get to work.