(Bloomberg) -- Finding a leader to follow has rarely been this tough for stock investors.
From tech giants to banks, the market’s shining stars have fallen back to Earth one after the other, with few holding to the top spot for very long. The latest flameout? Chipmakers. The Philadelphia Semiconductor Index has dropped almost 8 percent in four days, leaving it essentially flat for the year like the rest of the market. At this year’s peak in March, the chip gauge’s 2018 gains were four times the S&P 500 Index.
That the market leadership is more fleeting than ever is perhaps best illustrated by a Morgan Stanley study tallying the number of S&P 500 industries that outperformed over two consecutive months. Around 15 percent at the end of March, the proportion of winning groups hovered near the lowest level in at least 40 years.
“Leadership changes are afoot below the surface and portfolios need to adjust,” Mike Wilson, an equity strategist at Morgan Stanley, wrote in a research note. “The bigger challenge is trying to decide what to own as leadership is changing.”
Wilson recommended favoring energy stocks over chipmakers amid higher oil prices, while demand for handsets and crypto mining chips probably peaked. Investors should stick to banks as the industry will regain leadership while Treasury yields keep rising, he said.
As market leaders continued to falter, investors seem to be questioning the strategy of chasing winners. The iShares Edge MSCI USA Momentum Factor ETF lost almost $500 million last week, the biggest withdrawal since the fund was started in 2013.
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