ETFs
Market could take normal, routine break from record highs, says strategist: ‘Now is the time, if you have profits, to book them’
A leading market strategist believes markets could take a breather ahead of several key stock index events and the start of the second half of the year, with stock indexes trading at all-time highs.
What happened: Tech giant NVIDIA Corp. (NASDAQ: NVDA) recently adopted Apple Inc (NASDAQ: AAPL) and Microsoft Corp. (NASDAQ: MSFT) to briefly become the most valuable company in the world.
Nvidia shares’ 200% gain over the past year has helped major stock indexes, but could also lead to changes from investors in the second half of 2024.
“I think we are a little overwhelmed by our skis,” Free capital markets Chief Global Strategist Jay Wood said in an interview with CNBC.
Woods cited the major rebalancing of the Selected Technology Sector SPDR Funds (NYSE: XLK) which will see Nvidia as a larger holding company. Woods also mentioned that the market cap dominance between the three companies was changing at the top.
“It’s changing the way people limit their wallets.”
Woods said technical stocks and indexes above major moving averages had caused “a lot of euphoria in the market.”
“After a while, you’re going to take a break.”
Woods said the rebalancing of the XLK and the replenishment of the Russell 2000 would be key events coming in the second half. Investors may look to reduce their exposure to Nvidia after the surge in the first half of 2024, Woods said.
“A break given the good run we had is just a normal, routine thing.”
Woods said: “If you have profits, now is the time to book them.”
Related Link: EXCLUSIVE: Nvidia Dow Jones Inclusion ‘A Question of When’ – Will It Replace Intel?
And after: Although Woods anticipates a short-term pause, he remains optimistic about the market moving forward.
“I still think it’s still early and AI is leading the way,” Woods said.
With a potential pullback in tech stocks and leaders like Nvidia, Woods highlights other areas that could create opportunities.
“I like the finances here.”
Woods said July 12 was a key date to watch JPMorgan Chase & Co (NYSE: JPM) releases quarterly financial results and kicks off the industry.
Investors seeking exposure to the financial sector have many ETFs to choose from, including the SPDR funds for selected financial sectors (NYSE:XLF).
Woods also likes stocks of homebuilders with mortgage rates below 7%. THE SPDR S&P Home Builders ETF (NYSE:XHB) is a leading homebuilder ETF option for investors.
While the S&P 500, followed by the SPDR S&P 500 ETF (NYSE:SPY), reached record levels, the Russell 2000 did not have the same returns, up less than 1% for the year.
Woods said the Russell 2000 could catch up with other indexes in the second half of 2024.
“When it runs, it runs fast.”
THE iShares Russell 2000 ETF (NYSE:IWM) tracks the Russell 2000 index.
Woods said he doesn’t anticipate more than one reduction for the remainder of 2024 and that investors will likely try to position their portfolios based on the above.
“People are going to be looking for value as we move into the second half.”
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