Fundstrat technical strategist Mark Newton says the US stock market is poised to broaden beyond semiconductors and memory stocks, warning that tech has gotten “over its skis” after an 18% rally in eight weeks and is likely to consolidate through the summer.
Speaking in a recent interview, Newton identified financials, industrials, consumer discretionary, and healthcare as the sectors best positioned to play catch-up as technology cools. He noted that the XHS healthcare services ETF recently broke to new all-time highs, calling it an encouraging sign that broadening is underway.
“I am optimistic that we can start to broaden out. I do suspect that technology is going to need to consolidate at some point in June and or July. Difficult to see an 18% rally in 8 weeks just continue at the same pace. It’s highly unlikely, and we’re going to need to consolidate.”
Newton said the overall market is not overextended, but many investors have been cautious amid a leadership transition at the Federal Reserve and lingering geopolitical tensions. He noted that investors who lack sufficient exposure to high-weighted semiconductor and memory names have struggled to keep pace with the S&P 500.
Newton said he is not bearish and expects the consolidation in tech between July and October to create buying opportunities heading into the midterm elections.
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