To The Moon

On Thursday (11 July), we saw the stocks closed the trading session with Dow Jones gaining very little with 0.08% and NASDAQ dropped 1.95% while S&P 500 declined 0.88%.

With the release of a positive June Consumer Price Index that showed inflation was easing, that did not do much to help as investors started to rotate out of technology and into other sectors.

The bigger losers of the groups as rotation out of tech stocks begin was the chip makers. We are seeing Nvidia losing more than 5% despite expectations for record sales in 2024, many of the major chip maker firms fell in tandem on the stock market on Thursday.

$NVIDIA Corp(NVDA)$ retreated nearly 3% after three straight days of climbing.

Which Tech Stocks Manage To Reach New Highs

Even though we saw investors rotating out of the tech sector, we still see a few tech stocks reaching new highs, $Vertex, Inc.(VERX)$ which is a financial software company manage to go beyond its previous highs.

Another tech stocks, $Electronic Arts(EA)$ has also manage to create a new highs, but these two are in the traditional tech sector, which does not seem to have ride on the recent AI wave.

So if we looked at the tech stocks which are also mega cap contributing to the previous three days of rally, we could see that the $Vanguard Mega Cap Growth ETF(MGK)$ do suffer a decline of only 0.21%, hence, it might not be a bad idea to invest in an ETF to reduce the impact if investors decide to rotate out of a performing sector.

How Shall We Invest If Tech Rotation For Longer?

Even with the drop in tech stocks following the rotation, I would think that we need to adjust our strategy to include some defensive components.

If we looked at how the S&P 500 sectors are performing, we could see that both consumer staples and discretionary have also gone into the red with communication services and information technology.

Hence, I personally think that we could include some financial and health care ETF to help us to shoulder some of the impact.

Why iShares U.S. Healthcare ETF (IYH)?

Considering that this ETF is giving investors a 8.17% YTD returns despite healthcare suffering some decline over the last few months, and the expense ratio is considered to be pretty low at 0.40%.

If we looked at the performance of this ETF when there is a rally by the tech stocks, we could see that it is still performing.

This ETF is also performing correlating to Russell 1000 Health Care RIC.

Summary

I personally have included healthcare in my portfolio if you have read my previous article as defensive components. This is to prepare for any changes in the trading cycle where rotation is pretty common.

This tech rotation might not be too long as there are still strong fundamentals from the mega cap and tech stocks, the only worrying thing is the overvaluation, some of the technology stocks have been on the high side for the price, so this might be time for the adjustment to happen.

Appreciate if you could share your thoughts in the comment section whether you think including a healthcare ETF can help us to reduce the impact of any rotation to our portfolio.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.