Morgan Stanley Chief Equity Strategist Mike Wilson noted in his latest report that the US stock market is experiencing a rare internal divergence, with indices appearing calm while ordinary stocks are in disarray. He warned that tightening financial conditions are primarily impacting ordinary stocks, rather than the few AI-centric giants. Morgan Stanley's Composite Financial Conditions Index has jumped to approximately 1.4 standard deviations, a level only breached a few times in the past 35 years. The S&P 500 Equal Weight Index has lagged the market-cap-weighted index by 6% over the past six months. In September, when the 10-year US Treasury yield surpassed 5%, the equal-weight index fell by 5% in a single month, while the market-cap-weighted index remained almost flat. Goldman Sachs' Tony Pasquariello added that the median S&P 500 component stock has fallen 15% from its 52-week high, the worst reading since the dot-com bubble burst. Furthermore, the S&P 500 equity risk premium has fallen below zero, and financial stocks have dropped 7.7% in 30 days, with their performance relative to the S&P 500 falling to its lowest level since 2019.