Despite Nasdaq's worst week since April, State Street reiterates its bullish stance on artificial intelligence trading.
Anna Paglia, chief business officer, said momentum stocks still hold because investors are reluctant to move on from the growth story that has driven gains all year.
“How could you not want to participate in the growth of AI technology? Everyone has been waiting for the cycle to change from growth to value. I don't think that's happening yet because of the momentum,” Paglia told CNBC's “ETF Edge” earlier this week. “I don’t think there will be a rebalancing of trading until we see a signal from the market indicating a slowdown in these major trends.”
Paglia, who has worked in the exchange-traded fund industry for 25 years, sees a higher likelihood that the market will cool off early next year.
“There is a lot more attention being paid to diversification,” she said.
Her company manages several ETFs with exposure to the technology sector, including the SPDR NYSE Technology ETFwhich is up 38% so far this year through Friday's close.
However, the fund lost more than 4% last week as investors took profits on AI-related names. The fund's second largest holding as of Friday's close is Palantir Technologiesaccording to State Street's website. The stock plunged more than 11% this week following the release of the company's earnings report on Monday.
Despite the decline, Paglia reiterated her bullish tech view in a statement to CNBC later in the week.
Meanwhile, Todd Rosenbluth points out that a rotation is already sweeping the market. It points to renewed interest in healthcare stocks.
“The SPDR fund for the selected healthcare sector… which had been out of favor for most of the year, came back into favor in October,” the company's head of research said in the same interview. “Healthcare tends to be a more defensive sector, so we're watching to see if people continue to gravitate toward that to move away from some of those sectors like technology.”
The Health Care Select Sector SPDR Fund, which underperformed technology The sector is up 5% this year since October 1st. He was also the second best provider S&P 500 group this week.