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Fall of Netflix, other mo' stocks spells trouble

Traders work on the floor of the New York Stock Exchange.
Lucas Jackson | Reuters
Traders work on the floor of the New York Stock Exchange.

Netflix, Amazon.com and other shares with high multiples and high growth have recently retreated, a negative sign for the market going forward, strategists said.

Investors should rotate out of these momentum stocks and into steadier, more value-oriented names, according to Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America Merrill Lynch.

"Momentum, by definition, tends to work very well until it breaks," cautioned Subramanian, noting that going back to 1986, peaks in momentum stocks were followed by bigger losses over the next 12 months.

Since reaching an all-time high in May, the S&P 500 is off by 3 percent.

But, Netflix and Amazon, two of the market leaders this year, have seen their shares fall 6 percent and 8 percent, respectively, from their highs.

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