Stocks have been behaving oddly recently, with downright dull moves for the S&P 500 index, even as companies within it swing like mad.

Why it matters: This dynamic — individual stocks posting large, uncorrelated moves that cancel each other out — is another way the AI boom is reshaping the markets.

By the numbers: A measure of single-stock volatility — based on readings on each S&P 500 stock from the options market — spiked to more than 50 during July, trouncing the previous decade's average of roughly 32.

• It last got to 50 when the Trump tariffs spooked the market in April 2025. Before that, it only got there during the depths of the pandemic.
• But unlike those previous panicky episodes, the key gauge of index level volatility for the S&P 500 — not its individual constituents — barely budged this time.

The intrigue: "We saw the same thing in the '90s, the late '90s" Ben Bowler said of the recent divergence between volatility of individual stocks and the index itself. Bowler heads up equity derivatives research for Bank of America Global Research.

• "That's actually quite indicative of an asset bubble brewing in tech and AI," he said.
• "The market coalesces around this idea that the future is going to be a magical place and people don't want to miss out on that," Bowler said. "At the same, time there's a huge uncertainty with respect to how it's going to unfold and when it's going to unfold."

What they're saying: It's AI. In recent years, the market has been less focused on economic developments — which tend to be broadly good, or bad, news for most stocks simultaneously.

• Instead, the market's view of a company as an AI winner or loser is what moves shares.
• That's resulting in price moves that are individual one-offs rather than market-wide, correlated swings.

Behind the scenes: A lot of big hedge funds put on a trade designed to take advantage of this volatility regime.

• Known as the dispersion trade, it involves betting against big swings in the S&P 500 index — using the options market — while also betting on choppiness for individual stocks.

Yes, but: The prevailing winds shifted in July as new Chinese AI models prompted questions about whether cheaper options could compete with offerings from Anthropic and OpenAI. Stocks associated with the AI buildout tumbled.

• Some of those stocks were big positions of the hedge fund Situational Awareness, which was betting on them using borrowed money, or margin. When they started to tumble, it faced margin calls it couldn't meet without unloading more shares, worsening the downturn.
• At the same time, macro risk re-emerged as it became clear that the Iran war was far from done and dusted. Oil prices rose, reigniting worries about inflation.
• And the shaky performance of Federal Reserve chairman Kevin Warsh at his first press conference last month prompted government bond yields to climb.

Zoom out: The result was a big unwind of trades that had previously been working well. As hedge funds pulled in risk taking, volatility fell sharply for individual stocks.

State of play: Analysts say, despite the recent trade unwind, AI is still the most important thing for the markets. So it's likely that the swings in individual stocks will stay sharper than usual, at least compared to the index, for a while.

• "An AI‑driven stock market is one where we should expect higher levels of dispersion relative to history as the power of disruption can accelerate the separation between perceived winners and losers," Katrina Rodriguez, a derivatives trader at JPMorgan Private Bank, wrote in a statement to Axios.
• "Broader impacts will be felt only if the market questions the aggregate gains to corporate revenues from AI," Goldman Sachs analysts noted last week.

The bottom line: It's still all about AI.

Billionaire Mark Walter's surprise sale of the Los Angeles Lakers is drawing attention to, of all things, a once-staid corner of finance: life insurance.

Why it matters: Over the past decade or so, big Wall Street firms like Apollo Global Management and KKR have jumped into the business, buying life insurance companies that have been putting money into opaque private-credit investments that are harder for regulators to track.

The intrigue: Sometimes the same parent firm sits on both sides of the investment. One of its affiliates originates loans or packages them into securities, and an insurer it owns then buys them.

• These "affiliated" investments have drawn more attention from regulators in recent years.

Zoom in: Critics inside academia and some investors say they are a potential conflict of interest that puts regular folks' life insurance money at risk.

• One paper this year, from finance and accounting professors at Wharton, calls the life insurance money a "captive source of capital," and finds that PE-owned insurers "pay systematically higher prices when buying from affiliated issuers."

The other side: Private equity firms say that the insurers are investing in typically high-quality assets and that they're tightly regulated.

• State regulators require firms to disclose affiliated investments — and larger investments might require more notice.

State of play: Walter, in brief, is being scrutinized by federal investigators who are reportedly looking at the ties between loans made by Walter-controlled insurance companies to Walter-controlled businesses.

• Per the Wall Street Journal: "Authorities have focused on several entities that served as intermediaries between the Walter-controlled insurance companies that made the loans and the Walter-controlled businesses that received them."
• Walter's holding company has said it "is aware of and cooperating with the investigation."
• Insurance companies he controlled reportedly helped finance his 2012 purchase of the Dodgers and later funded other Walter-linked businesses.
• Walter-controlled insurers are now unwinding loans made to affiliated businesses and seeking to raise cash, Bloomberg reported yesterday.

Between the lines: The attention Walter is drawing to the industry could bring more scrutiny to it.

• Another major insurance deal is facing a closely watched review in Delaware.
• As Semafor's Liz Hoffman put it: "Finance's hottest party may have found its pooper."