Value stocks are emerging as the clear winner as investors this month turn to more traditional parts of the market, and shift away from growth and momentum issues. For proof, just look at tech stocks in July. The Nasdaq Composite is down more than 6% in July, nearing a correction, as investors — wary of any whiff that hyperscalers could pull back on their spending — flee chip stocks en masse. The iShares Semiconductor ETF is down more than 26% this month. Momentum stocks are on track for their worst month on record, with the iShares MSCI USA Momentum Factor ETF (MTUM) tumbling more than 15% this month. The story is far different in other corners of the market. Value, especially, has been outstanding, as traders pivoted toward companies more exposed to the real economy as opposed to artificial intelligence. The iShares Russell 1000 Value ETF (IWD) , which tracks large cap value, is up more than 3.5% this month, and has rallied more than 19% year to date. That’s mirrored in smaller companies too, with the iShares Russell 2000 Value ETF (IWN) of small cap value stocks up more than 22%. Ketchup rotation “Sell semi’s, buy ketchup is what the market has rotated into,” wrote Peter Boockvar, investment chief at One Point BFG Wealth Partners. “I’ve expressed our bullish and long positioning in consumer staples stocks many times here and it seems that while selling ketchup, cream cheese and Kleenex tissue is not nearly as exciting as high bandwidth memory, they are a beneficiary of a shift in investor flows and what I believe is a bottoming in fundamentals,” Boockvar added. The investor identified Kraft Heinz as a “favorite” stock that’s under loved on Wall Street. According to CNBC’s analyst consensus tool, analysts’ consensus rating on the hot dog and mustard maker is hold. Yet Kraft Heinz is up more than 14% this year, twice the S & P 500 gain. Coca-Cola is another Boockvar favorite. Both Coke and Kraft Heinz are up about 8% in just the first three days of this week alone. Other value-oriented parts of the market are also outperforming. Healthcare has rallied after several years of underperformance that left the sector’s weighting in the S & P 500 at 9%, down from 16% at its peak, according to JPMorgan head of global market strategy Dubravko Lakos-Bujas. “With valuations still favorable … and earnings growth poised to accelerate materially in 2027, we believe the sector is approaching a more durable inflection point,” Lakos-Bujas wrote Tuesday. Biopharma and medtech/life science tools are two groups of health care stocks that the strategist favors, rather than managed care, for example. Small caps may also continue to benefit from the rotation. Earlier this month, Jefferies found that hedge funds are overweight small caps by a wide margin, with 13% of their net portfolio in Russell 2000 names, based on MSCI Hedge Fund holdings. “One of the problems we have here is AI fatigue,” Ed Yardeni, president of Yardeni Research, told CNBC’s “Squawk on the Street” earlier this month. “Everybody’s kind of tired, trying to figure out who’s going to make money in all this, and so what you’re seeing is the market rotate to companies [where] everybody understands their business,” That’s where the strength is, the long-time economist said. “Between energy as an overweight, healthcare and financials and industrials, which is where we are recommending overweighting, I think the market could make new highs,” Yardeni added.
