Morgan Stanley analyst warns: semiconductor sector may be at a cyclical peak.

BlockBeats News, June 29 — A strategy team led by Mike Wilson of Morgan Stanley cautioned that investors need to significantly raise their screening criteria for stock selection during this adjustment. Wilson stated that the broadening of the current market rally still has room to continue, with the core driver being that "the strength of the earnings recovery across the entire market is severely underestimated by the market." Against the backdrop of falling oil prices and the likelihood that the Fed's hawkish stance will be less aggressive than current market pricing, he is bullish on consumer discretionary, transportation, and regional bank sectors.

Another core concern for Wilson is that the recent sharp volatility in the semiconductor sector has made it significantly more difficult for the market to maintain historically high allocation positions. The Philadelphia Semiconductor Index (SOX) is particularly representative of this volatility: it surged 7.3% in the week of June 15, only to plunge 7.9% the following week.

He also proposed a cautionary analogy for bulls: Semiconductors may become another category that completes a boom-and-bust cycle this year, with a price trajectory similar to the silver sector, only trailing silver by about four months. "If the broadening of the market rally is a sustainable theme, then the current upward momentum in semiconductor prices is likely to reach a cyclical peak. Judging by the rhythm of the market, this inflection point appears to be happening as expected. This does not mean the semiconductor industry cycle has completely ended, but the short-term loss of upward momentum in this sector will leave room for excess returns in other sectors; sectors such as consumer discretionary and transportation will experience a period of relative strength driven by their own favorable factors."