Fundstrat technical strategist Mark Newton says the US stock market is about to expand beyond semiconductors and memory stocks. He warns that after an 18% rally in eight weeks, the technology has pushed past its limits and is likely to consolidate in the summer.
In a recent interview, Newton spoke identified financial services, industrials, consumer discretionary and healthcare are the sectors best positioned to catch up as technology cools. He noted that the XHS Healthcare ETF recently hit new all-time highs, calling this an encouraging sign that broadening is underway.
“I’m optimistic that we can start to broaden. My guess is that technology will have to consolidate sometime in June and or July. It’s hard to see an 18% rally in eight weeks continuing at the same pace. It’s highly unlikely and we’ll have to consolidate.”
Newton said the market as a whole is not overextended, but many investors have been cautious amid a leadership transition at the Federal Reserve and ongoing geopolitical tensions. He noted that investors without sufficient exposure to highly weighted semiconductor and memory names are struggling to keep pace with the S&P 500.
Newton said he is not bearish and expects consolidation in the tech sector between July and October to create buying opportunities ahead of the midterm elections.
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