Everything comes to an end — both the good and the bad. As investors prepare for heightened volatility in the S&P 500 in October, following several months of a sharp rally, the markets are beginning to bid farewell to the Magnificent Seven. Since the launch of artificial intelligence technologies in early 2023, betting on the stocks of companies in this group seemed like a win-win trade. However, nothing lasts forever.

Performance of the Magnificent Seven

At first glance, the giants appear unshaken—the Magnificent Seven accounts for 35% of the S&P 500's market capitalization. In 2026, the group's earnings are expected to grow by 15% and revenue by 13%. This is stronger compared with the rest of the index, where profit is projected to rise by 13% and revenue by 5.5%.

Still, there are serious changes within the group itself. While Nvidia, Alphabet, Meta, and Microsoft remain in strong positions, Apple, Amazon, and Tesla are clearly lagging. It may be time to replace them with other companies tied to artificial intelligence — such as Broadcom, Oracle, and Palantir Technologies.

The new stars are ready to take the place of the old ones. However, for now, investors are more concerned about the shift of the stock market toward greater volatility. Many doubt that the S&P 500 rally in the fourth quarter will continue at the same pace as in April through September. Goldman Sachs warns that, since 1929, stock market volatility in the final quarter of the year has been, on average, 20 percentage points higher than during the rest of the year. In the 21st century, this figure has been even greater due to numerous corporate, economic, and political developments.

Seasonal Volatility Dynamics of the S&P 500

One potential trigger for a spike in S&P 500 volatility could be a US government shutdown. Markets appear overly complacent about the debt ceiling. They assume the issue will be resolved at the last minute, as it has been in previous years, and that catastrophe will be avoided. But time is running out — only a few days remain until the end of September, and Democrats and Republicans are locked in a standoff. The former are demanding healthcare concessions, while the latter are threatening public sector layoffs.

It is worth noting that the last government shutdown occurred during Donald Trump's previous presidential term. This led to delays in the release of economic data and a slowdown in GDP growth. This time could be even worse. Weakness in the labor market risks accelerating, which could spell serious trouble for the US economy. Is a surge in stock market volatility just around the corner?

From a technical perspective, on the daily chart, the S&P 500 has clearly followed the buy-on-dip strategy at the pivot support level of 6570. Long positions could be expanded after the successful breakout of the fair value at 6610, which now turns into key support. It makes sense to continue focusing on buying as long as the broad stock index trades above this level.