Although two trading days have just passed in 2022, the signs of plate rotation seem to be particularly obvious in the US stock market: growth stocks represented by technology stocks are generally under pressure, while value stocks are full of momentum.
Multiple market comparisons are revealing this - along with the sell-off of software and Internet stocks on Tuesday, the Russell 1000 growth index fell 1.1% that day. Meanwhile, the surge in energy and financial stocks pushed up value stocks.
in the past two trading days, the performance of Russell 1000 growth index has lagged behind the value index by 1.5 percentage points, which is the most sluggish performance of growth stocks since 1995.
Among them, a basket of technology stocks that have so far failed to achieve profitability has a particularly bleak trend . It fell more than 4% on Tuesday and has now fallen to the lowest level since October 2020
On Tuesday, the second day in a row, stocks betting on economic recovery outperformed home concept stocks again:
Although the blue chip Dow hit another record closing high on Tuesday, the Nasdaq 100 fell 1.4%, the biggest decline in more than two weeks. The overall decline of expensive software stocks was more than 4%, the highest since June last year. The "wooden sister", whose earnings failed miserably last year, also made a bad start again at the beginning of the new year, and its flagship fund ark innovation ETF (arkk) fell 4.4%
the bitter memories of Wall Street a year ago are being recalled?
Interestingly, for many investors, the above market comparison in the first two trading days of the new year is not strange - this scene was also staged in the first quarter of last year.
As at that time, this kind of rotation phenomenon is also accompanied by the surge in US bond yields. Investors are once again worried that the rise in interest rates will put pressure on highly valued assets. The yield of 30-year US bonds has risen by nearly 15 basis points in the first two trading days of the new year, the largest two-day increase since March last year.
the logic behind this is not difficult to understand: the prospect of rising borrowing costs is prompting traders to reconsider their preference for growth stocks, especially those with frighteningly high valuations; Meanwhile, the Fed's interest rate hike may mean that the economy is still accelerating growth, which will benefit those cyclical stocks.
Danny Kirsch, head of options at cornerstone macro LLC, said, "the prospect of rising interest rates is making all these technology stocks less attractive. If yields continue to rise, I think this situation may continue."
Oppenheimer & Co。 Alon rosin, head of institutional equity derivatives at, "You can think that this plate rotation is partly the result of rising real and nominal yields. Large technology stocks struggled until the end of last year, but this rotation should have occurred long ago. At present, we have multiple concerns about all technology stocks as the Fed's liquidity faucet is about to meet the key node of tightening."
Zerohedge, a well-known financial blog website, also said that with the rise of the actual rate of return, the Nasdaq 100 index still has a lot of downward space compared with the Russell 2000 index (mainly small market value stocks):
in fact, there have been many cases of value stocks trying to challenge the dominant position of the growth stock market in recent years, such as the experience in the first quarter of last year and the last few months of 2018, but in the end, these rotations are fleeting. However, some axiologists are now more optimistic. They believe that as the Fed becomes more hawkish, corporate fundamentals and valuation will become very important.
Larry Weiss, trading director of insinet LLC in New York, said, "there are not many predictions that the stock market will continue to soar sharply in 2022, so many people are allocating funds to companies that can continue to make profits rather than loss. This may be the return of value we have been looking forward to!"
of course, for the performance of the U.S. stock market, the rise of growth stocks, especially large technology stocks, may not be a good thing once it is weak in the year. investment banks such as Goldman Sachs warned a few weeks ago that those largest market leaders (such as faamg) could bring disaster to the market once the rise burst. Don't forget that the five most popular technology giants - Apple, Microsoft, NVIDIA, Tesla and Google - have contributed more than half of the returns to the S & P 500 index since April.
(Financial Associated Press)
