From Morningstar: 2024-09-09 05:40:00

The technology stock rally is losing steam amidst economic outlook fears, despite low recession chances and upcoming Fed rate cuts. Investors are shifting from growth to value stocks, signaling market dynamics at play. Tech stocks dominated with a 109.5% surge from 2022-2024 market peak. Nvidia, leading the gains, now pressures the market downward.

Stock Market Pullbacks Over Time
Tech stocks dropped 8.5% post-peak versus the overall market’s 1.6% loss. Morningstar’s US Market Index surged 54.1% from 2022-2024, driven by tech stocks’ 109.5% rise. Artifical intelligence protagonists are now detracting value as formerly high-flying stocks deflate.

AI Leads the Way Down After Leading the Way Up
Top AI stocks, like Nvidia, dragged the market down post-peak after leading the rally. Nvidia fell 15.9% after contributing 7.9 percentage points to the market’s gain. Major AI players, like Microsoft and Alphabet, echo the trend, signaling rotation out of overvalued tech stocks.

Value Stocks Catch a Wave as Growth Stocks Sink
Large growth stocks, including Nvidia, have seen the most volatility post-market peak. Steadier value stocks gained 18.3% annually during the rally, outperforming growth stocks since. Analysts believe value stocks may outperform as the economy slows, propelled by Fed rate cuts and AI rotation.



Read more at Morningstar: 4 Charts on The Rotation Out of Tech and Growth Stocks