Rotation?

Investors are taking profits on the very large tech stocks and buying laggards. Among these laggards are many value issues in previously abandoned sectors, such as industrials, consumer, and financials. In addition, small-cap stocks are also attracting a lot of attention and new buying.

The impetus behind this trend is the prospect for lower interest rates coming soon. The belief is that lower rates will be good for these businesses. Additionally, these companies have been trading at cheap valuations. Many offer good dividends with improving prospects, so it is understandable why these are suddenly attractive.

There is also a bit of a bet going on that a potential new Trump administration may offer a better business environment for these firms. It is certainly too early to tell what any new political landscape might look like, but hope is in the air. The Bull and his partners believe that the interest rate outlook carries the most weight.

A rotation from the very extended winners was inevitable. A catalyst was all that was needed. Lower rates seem to be the spark. This rotation has happened several times over the past year. Each turned out to be a false start. Will this time be different? Only time will tell. Nevertheless, the result is a broadening out of performance in the stock market. This is very healthy, and should it persist, it will help ensure a continuation of good returns. Stay steady my friends.

The Lonely Bull