A leading market strategist thinks markets could stall ahead of some major market index events and the start of the second half of the year, with stock indexes trading at all-time highs.
What happened: The technology giant NVIDIA Corp (NASDAQ:NVDA) recently passed Apple Inc (NASDAQ:AAPL) and Microsoft Corp (NASDAQ:MSFT) to briefly become the world’s most valuable company.
The 200% gain for Nvidia shares in the past year has helped the major stock indexes, but it could also lead to changes by investors in the second half of 2024.
“I think we’re a little out on our skis,” Liberty Capital Markets Global Chief Strategist Jay Woods said in an interview with CNBC.
Woods mentioned the main rebalancing of Technology Select Sector SPDR Fund (NYSE: XLK ) that will see Nvidia take on a bigger ownership. Woods also mentioned that it was changing at the top for market capitalization dominance among the three companies.
“It’s changing the way people are limiting their wallets.”
Woods said technical performance stocks and indexes above major moving averages led to “a lot of euphoria in the market.”
“After a while, you’ll stop.”
Woods said the rebalancing of XLK and the rebuilding of the Russell 2000 are key events coming around the second half of the year. Investors may look to reduce their exposure to Nvidia after the sharp rally in the first half of 2024, Woods said.
“A break given the great run we’ve had is just normal and routine.”
Woods said, “now is the time if you have profits to book them.”
Related Link: EXCLUSIVE: Nvidia Dow Jones Involvement ‘A Matter of When’ — Will Intel Replace It?
What to expect next: While Woods sees a pause happening in the short term, he remains bullish on the market going forward.
“I still think it’s early, HE leads the way,” Woods said.
With a possible pullback in tech stocks and leaders like Nvidia, Woods is highlighting several other areas that could present opportunities.
“I like the finances here.”
Woods said July 12 is a key date to watch JPMorgan Chase & Co (NYSE:JPM) reported quarterly financials and sector start.
Investors seeking exposure to the financial sector have many ETFs to choose from including Select Financial Sector SPDR Fund (NYSE:XLF).
Woods also likes stocks of homebuilders with mortgage rates going below 7%. of SPDR S&P Homebuilders ETF (NYSE:XHB) is a leading homebuilder ETF option for investors.
While the S&P 500, tracked by SPDR S&P 500 ETF (NYSE: SPY ), has hit record highs, the Russell 2000 hasn’t had the same returns, at less than 1% annually.
Woods said the Russell 2000 could catch up to other indexes in the second half of 2024.
“When you run, you run fast.”
of iShares Russell 2000 ETF (NYSE:IWM) tracks the Russell 2000 Index.
Woods said he is not anticipating more than one cut for the rest of 2024, and investors will likely try to position their portfolios based on the items above.
“People will be looking for value as we go into the second half of the year.”
Read more: Nvidia shorts ‘are big’: AI Chipmaker is the most shorted stock, ‘hedging against general market and tech sector’
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