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Investing.com -- U.S. artificial intelligence stocks were once at the top of investor wishlists, but recently many have shied away from popular investor theme, prompting concerns of whether the US tech bull run is nearing an end.
"Globally, dramatic style rotation recently has prompted the question of whether equity markets are at a turning point and performance leadership may differ in 2025," BofA strategists said.
The Global Momentum style has underperformed by 12% in three weeks as previous performance leaders underperformed. This underperformance comes at a time when there has been a regional rotation away from the US and global sector rotation towards defensives, BofA said.
The year-to-date style outperformers have been more defensive, with dividend, value, small size, and quality leading the gains.
But whether this rotation is sustainable depends partly on whether the US economy slows, whether Europe and China can recover at the same time, and whether the multi-year Tech investment theme takes a breather.
While history suggests potential for a dramatic rotation when a popular investment theme such as US AI becomes a crowded position and expensive, there isn’t enough data to suggest the current rotation has staying power.
"So far, data hasn’t changed enough to justify sustained rotation," BofA said.