Tech stocks are now cheaper than the S&P 500 for the first time since 2017 - here's what history says comes next: Chart of the Day

Key Points:

• Following the midterm elections, tech stocks experienced their worst day since the 2020 COVID crash, with the S&P 500 and Nasdaq each falling about 3% for a fourth consecutive week, while the equal-weight S&P 500 remained near record levels.
• For the first time since 2017, tech stocks traded cheaper than the broader market, with a price-to-earnings ratio of about 17 times expected earnings compared to the broader index's 18 times, signaling the market is pricing in significant negative outlooks.
• Semiconductor stocks were hit hardest, with the PHLX Semiconductor Index dropping nearly 30% over five weeks, and major players like Micron and Sandisk losing over 20% in a single week, reflecting concerns about a slowdown in data-center construction.
• Truist Wealth recommends maintaining an overweight position in U.S. large caps and adding small caps as a hedge against rotations away from megacap tech, noting historical trends where stocks typically rise in the year following midterm elections.
• Some market strategists, like Michael Martin, advise caution, suggesting it's a time to hold cash rather than buy, as they see current trends as part of a broader downtrend rather than buying opportunities.