U.S. Momentum Stocks Tumble in Early July as Semiconductor ETFs Plunge 11.4% After Q2 Rally

According to MarketWatch, momentum-tracking ETFs and semiconductor stocks plunged in early July after a strong second quarter, with the Invesco S&P 500 Momentum ETF (SPMO-US) down 6.6% and the Invesco PHLX Semiconductor ETF (SOXQ-US) down 11.4% in the first two trading days of the month. The SPMO surged approximately 44% in the three months through June, marking its strongest quarterly performance since its 2015 inception and driving the S&P 500 and Nasdaq Composite to their largest quarterly gains in six years.

According to 3Fourteen Research co-founder Warren Pies, July historically shows seasonal weakness for momentum stocks, with an average return of negative 5% over the past five years. The shift signals potential fund rotation as investors take profits in semiconductor stocks, with market analysts suggesting this volatility is a healthy market adjustment rather than a signal of broader decline.