State Street is maintaining its positive outlook on the artificial intelligence (AI) trade, even as the Nasdaq experiences its most significant weekly decline since April.
Chief Business Officer Anna Paglia expressed confidence in momentum stocks, noting that investors are hesitant to abandon the growth narrative that has propelled gains throughout the year. She remarked, "How would you not want to participate in the growth of AI technology? Everybody has been waiting for the cycle to change from growth to value. I don't think it's happening just yet because of the momentum," during an interview on CNBC's "ETF Edge".
Paglia, with 25 years of experience in the exchange-traded funds (ETF) industry, anticipates a higher chance of the sector cooling down early next year, with an increased focus on diversification.
Her firm oversees several ETFs with technology sector exposure, such as the SPDR NYSE Technology ETF, which has climbed 38% this year up to Friday's close. However, the fund saw a more than 4% pullback over the past week as investors realized profits in AI-linked stocks. Notably, the fund's second-largest holding, Palantir Technologies, saw an over 11% drop following its earnings report on Monday.
Despite the downturn, Paglia reiterated her positive stance on tech in a later statement to CNBC.
Meanwhile, Todd Rosenbluth observes a rotation beginning to influence the market, with a renewed interest in health-care stocks. He highlighted, "The Health Care Select Sector SPDR Fund, which has been out of favor for much of the year, started a return to favor in October." Rosenbluth notes health care's defensive nature, stating, "We're watching to see if people continue to gravitate towards that as a way of diversifying away from some of those sectors like technology."
The Health Care Select Sector SPDR Fund, underperforming against technology this year, is up 5% since October 1 and was the second-best performing S&P 500 group this week.