With stock indexes trading at all-time highs, leading market strategists believe the market could be taking a breather ahead of some major market index events and the start of the second half of the year.
what happened: Technology giants NVIDIA (NASDAQ:NVDA) recently passed Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) briefly became the most valuable company in the world.
Nvidia’s 200% rise in shares over the past year has boosted major stock indexes, but it could lead to a change of heart for investors in the second half of 2024.
“I think we’ve gone a little too far.” Freedom Capital Markets Chief Global Strategist Jay Woods He said this in an interview with CNBC.
Woods said, Technology Select Sector SPDR Fund (NYSE:XLK) is expected to increase its stake in NVIDIA. Woods also noted that NVIDIA is poised to take the top spot in terms of market cap dominance among the three companies.
“This changes the way people limit their portfolios.”
Woods said technical indicators rising above key moving averages had created “tremendous enthusiasm in the market.”
“I’ll pause it after a while.”
Woods said the rebalancing of XLK and the reconstitution of the Russell 2000 are key events happening later this year. Investors may want to reduce their exposure to Nvidia after the stock’s surge in the first half of 2024, Woods said.
“Given the excellent performance so far, the pause is completely normal and routine.”
“If there’s a benefit, now is the time to book,” Woods said.
Related Link: Exclusive: Nvidia’s Dow Jones Inclusion is ‘A Question of When’ — Will it Replace Intel?
What’s next: Although Woods sees a short-term lull, he remains bullish on the market going forward.
“This is still in its early stages and I think AI will lead the way,” Woods said.
With technology stocks and big names like Nvidia facing potential declines, Woods is looking at other areas of potential opportunity.
“I like the financial situation here.”
Woods said July 12 is a key date to watch. JPMorgan Chase (NYSE:JPM) kicked off the sector with its quarterly financial report.
Investors looking to invest in the financial sector have many options, including the following ETFs: Financial Select Sector SPDR Fund (NYSE:XLF).
Woods also likes homebuilding stocks, where mortgage rates are below 7%. SPDR S&P Homebuilders ETF (NYSE:XHB) is a leading homebuilding ETF option for investors.
The S&P 500 is SPDR S&P 500 ETF (NYSE:SPY) hit new all-time highs, but the Russell 2000 failed to deliver a similar return, gaining less than 1% for the year.
Woods said the Russell 2000 could catch up with other indexes as soon as the second half of 2024.
“When I run, I run fast.”
of iShares Russell 2000 ETF (NYSE:IWM) tracks the Russell 2000 Index.
Woods said he doesn’t expect more than one rate cut over the remainder of 2024 and that investors will likely look to position their portfolios based on the above factors.
“As we get into the second half of the year, people are going to be looking for value.”
Read next: Nvidia short sellers ‘drop off big time’: AI chipmaker is the most shorted stock, ‘hedge to overall market and tech sector’
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