Cembalest Warns on US Equity Market Technicals Amid AI Trade

Michael Cembalest, a top strategist at JPMorgan, has expressed caution about U.S. equity market technicals due to recent trends in the artificial intelligence (AI) trade. In his July 22 report, 'Eye on the Market,' he notes that semiconductor stocks have recently outperformed AI hyperscaler stocks.

This trend is similar to what occurred in 1999-2000 during the dot-com boom, when communications services stocks slowed their growth even as communications equipment stocks continued to climb. This ultimately led to a downturn in the entire stock market.

Cembalest suggests that investors diversify beyond U.S. stocks and the AI trade by considering international exchange-traded funds (ETFs). Two such ETFs are the Vanguard FTSE All-World ex-US ETF (VEU) and the State Street SPDR Portfolio Developed World ex-US ETF (SPDW).