Wednesday's Market Minute: Gas In The Tank

After the market's response to Gilead updates last week and Moderna progress this morning, it seems clear that less is priced into the market with regards to virus treatment and vaccination than bears would have one think. There is also still probably an under-appreciation for the market's ability to have a sustainable rotation out of the Nasdaq.

Yes, I'm talking about the long-awaited shift to value and economically-sensitive domestic stocks. The trade has been trying to pick up steam throughout the recovery but the stop-start nature of reopening has prevented it from truly thriving. Yet over the last three days, this group of companies has been oddly bubbling to the surface again. Despite the mounting negative narrative about coronavirus in the U.S., sectors like industrials, materials, banks, and some consumer brick-and-mortar businesses have been outperforming as the tech trade hits a speed bump.

There have been a handful of times the last several years where the value style of investing gained ground on momentum: Fall 2019, July-November 2018, and the second half of 2016. These were all periods of accelerating growth or economic rebound. The shift in 2016 is particularly notable as the economy was emerging from a pseudo-recession and prospects looked good for real growth.

Today, this rotation is waiting for a spark, and with quarantine dynamics pushing forward valuations for growth tech companies at the expense of everything else, the rotation when it arrives should be more powerful and sustainable than the other attempts this decade.

Photo by Patrick Weissenberger on Unsplash