Fall is coming, cooler air is already encroaching on summer in many places, and the U.S. stock market is shifting as well. Value has been showing increasing signs of resurgence for some time now. The recent sell-off of the large capitalization tech and stay at home beneficiaries may signal the shift. At some point, it simply became too difficult to push valuations of these any higher. Just about everybody that wanted to invest in these have, so then what? Vaccines and therapies for Covid-19 are getting closer signaling a return to a more normal economy. This may take some time, but investors can anticipate this six to nine months in advance.
The value sector is cheap by comparison, pays better dividends and benefits from an improving economy. This rotation from growth to value has been expected for some time. There have been many false starts, this time it may be real. The market action is promising. The Bull and his partners have a foot in both camps. As more evidence accumulates that the shift is durable, more resources will be dedicated to this new trend. We are watching carefully. To prepare, accounts have been rebalanced to lock in some of the massive gains in many of the growth names. Rotations from one category to another are healthy and, in this case, reflects confidence in recovery.
Stay steady, my friends.
The Lonely Bull