The Point, 7.19.26: The hot stock-market trade you probably haven't heard about

It's actually pretty boring. The good news is you can make money outside of AI.

You don’t need to follow financial news every day to keep up with markets and the economy. You just need a sharp weekly summary of what really matters. Here’s The Point:

Most weekly recaps of the stock market tell you what happened in the Dow, the S&P 500, and the NASDAQ indexes. Those represent three broad slices of the market.

You don’t usually hear how the value sector is doing—maybe because it sounds like the opposite of a hot trade. But that’s where the action is at the moment, as the artificial-intelligence boom takes a breather.

Value stocks are broadly defined as shares that seem undervalued relative to the company’s sales and revenue. They include big names. The top five companies in the Russell 3000 value index are Amazon, Apple, Microsoft, Berkshire Hathaway, and JPMorgan Chase.

Value stocks have been the winners in recent weeks, as investors rotate out of growth stocks that have driven most of the market gains during the last year. Semiconductor stocks, for instance, have been in retreat for several weeks.

The white-hot semiconductor trade peaked around June 22, with the Philadelphia semiconductor index down about 16% since then. Semis have been so hot that some cooling was inevitable. The one-year return is 204%, even with the recent selloff.

[The Weekly WTF: President shouts, nobody listens]

As investors take profits on semis and other tech holdings, they’re putting some of it into value funds, which are overperforming. The Russell value index was up 0.5% for the week, while the S&P fell 1.3% and the NASDAQ fell 2.6%. The one-month gain in the Russell value index is 2.3%, compared with a 0.5% gain in the S&P and a 1.9% loss for the NASDAQ.

You can see from this chart that value stocks ran with the pack for most of the year, then took the lead in June.