Investment Bank Piper Sandler Removes Nvidia From Model Portfolio, Anticipating S&P 500 Correction: 'Cool The Engines'

Investment bank Piper Sandler is forecasting a correction in the S&P 500 and has consequently removed Nvidia Corp. NVDA from its model portfolio,

What Happened: Despite a robust first quarter for stocks, Piper Sandler’s Chief Market Technician, Craig Johnson, foresees a 5% to 10% correction in the S&P 500 in the near term, CNBC reported on Thursday. Johnson points to inflated valuations and decelerating momentum as the primary causes for the predicted downturn.

“As investors show complacency within the current uptrend and exhibit a Fear-Of-Missing-Out (FOMO), we believe now is the time to be more vigilant and ‘Cool The Engines,'” Johnson stated on Wednesday.

See Also: Jim Cramer Jokes About The ‘Bright Side’ Of GameStop Skipping Earnings Call After Stock Falls Nearly 17%: ‘I Don’t Have To Listen To…’

Notably, Johnson has removed Nvidia, a significant contributor in the AI sector and a key driver of S&P 500 gains, from his model portfolio. He has instead included Micron Technology Inc. MU and Taiwan Semiconductor Manufacturing Co. TSM among others.

Despite positive outlooks on Nvidia’s long-term prospects, worries about the chipmaker’s escalating costs have prompted a search for alternative AI investments. Piper Sandler has decreased its model portfolio’s equity exposure from 98% to 90%, allocating 10% to cash.

While other firms have raised their year-end S&P 500 targets following the recent rally, Piper Sandler maintains its target of 5,050, implying a roughly 3% downside from Tuesday’s closing level.

Why It Matters: The S&P 500 has been on a strong run, settling at a fresh record level and recording a 10% increase in the first quarter. This surge is the best first-quarter performance since 2019.

However, the S&P 500 is faring better than the Russell 2000 Index of small-cap stocks which has been on its worst run in 20 years. This disparity is due to investors’ focus on big tech companies like Nvidia, which have seen triple-digit gains over the past three years.

Read Next: Elon Musk Reacts As Tucker Carlson Says ‘No Clue At All How Nancy Pelosi…Stock Picks Are, Like, Way Better Than Warren Buffett’s’

Illustration via Shutterstock


Engineered by Benzinga Neuro, Edited by Pooja Rajkumari


The GPT-4-based Benzinga Neuro content generation system exploits the extensive Benzinga Ecosystem, including native data, APIs, and more to create comprehensive and timely stories for you. Learn more.


Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Posted In: Analyst ColorNewsMarketsGeneralPiper SandlerPooja RajkumariS&P 500Stock market correctionStories That Matter
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!