Philadelphia Semiconductor Index Enters Bear Market – Should You Flee? Experts Reveal What 'Wall Street Elites' Are Thinking Contrarily

Taiwan's stock market has recently experienced intense high-level volatility and a battle to defend its quarterly moving average. According to Bloomberg, Taiwanese retail investors have been rapidly unwinding leveraged positions, with margin debt declining faster than during the U.S. tariff storm in April last year.

On the financial program 'Wealth Path,' Tamkang University adjunct associate professor of finance and IFA independent financial advisor Lee Kuei-jung pointed out that since June 20, the Philadelphia Semiconductor Index (SOX) has started to correct, pulling Taiwan stocks along with U.S. tech equities.

"Wall Street is now debating one key issue," Lee said, "now that the Philadelphia Semiconductor Index has entered a technical bear market with a 20% decline, can it still be supported? Has the U.S. stock market fully deleveraged?"

Lee referenced a recent Goldman Sachs report stating that the U.S. equity market has indeed undergone full deleveraging. Fund managers' cash positions have reached historic lows, and momentum-based trading strategies are shifting. As a result, after the SOX correction, deleveraging has led to crowded trades.

Bank of America data shows the most crowded trades among brokers are in semiconductor stocks, with SK Hynix, Micron, and Kioxia as the key players. These three companies have surged since the beginning of the year, driving global investors to aggressively enter this sector.

"SK Hynix, Micron, and Kioxia have all risen since the start of the year, fueling a global investment frenzy," said Lee, showing an image of an SK Hynix booth (AP photo).

Lee noted that short-term positioning is relatively stable. Goldman Sachs recently shifted its momentum factor strategy to a more relaxed stance, having completed deleveraging, but capital has not exited the market. This made last week's U.S. market action particularly interesting—on June 24, all 10 major sectors rose except for tech stocks, which are currently in a consolidation phase.

Lee pointed out that the Dow Jones and Russell 2000 indices remain above their quarterly moving averages, while the S&P 500 is slightly below. Tech stocks, the Nasdaq, and the Philadelphia Semiconductor Index are all below their quarterly lines.

"Among the top 100 best-performing U.S. ETFs this year, excluding leveraged ones, semiconductor-related ETFs dominate," Lee noted. The largest by assets is SMH, nearing $70 billion. SOXX, the well-known Philadelphia Semiconductor Index ETF, has risen 83% alone. Its 3x leveraged version, SOXL, has surged nearly 274%.

However, for Korean and Taiwan ETFs, net asset values haven't changed much. The only major change is SOXL, which has lost nearly $30 billion in assets.

Lee believes confidence is currently weak. Warren Buffett recently told CNBC that investors should not ignore long-term fundamental trends due to a single quarter's earnings report.