"It's been a good year for growth investors. While volatility has taken an upward turn in the past week, with good earnings seemingly no longer able to cause sustained upside moves, there's reason to be concerned that valuations have crept too high. And, with that, a correction might be necessary to clear out some of the froth in an expectations reset of sorts."
"If you have no reaction or negativity in response to a good or great quarter, perhaps the lack of positive reaction is, in itself, a means of resetting valuations or providing shares with more opportunity to catch up to the earnings. Undoubtedly, it took more than just a beat and raise to move the needle higher in Q3. And while the same story could be in the cards for Q4 (beats but no surges),"
Growth stocks have delivered strong returns year-to-date, but recent volatility and muted market responses to solid earnings suggest valuations may have become stretched. A correction could be necessary to clear froth and reset expectations, and recent pullbacks among large tech names may already represent such a reset. Investors should scrutinize companies that lack accelerating momentum on the expectations treadmill. Semiconductors and AI-exposed firms face amplified downside during growth scares, but also amplified upside on recoveries. The VanEck Semiconductor ETF has outperformed the S&P 500 year-to-date, rising about 43%, and presents a potential buying opportunity if China-U.S. relations continue to ease.
Read at 24/7 Wall St.
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