Morning Notes — Bond Yields

Low volatility, secular growth stocks outperformed into year-end reaching a record high premium to high beta stocks.  The rotation into mega-cap Tech at year-end helped the S&P 500 rally nearly 5% in the four days ending 12/27. High beta stocks tend to outperform on increased fund flows in January as year-end tax-loss harvesting turns into bottom fishing.  With positioning and sentiment stretched to extremes, we wouldn’t be surprised if the impact was greater this year.  The only reason we care about the January effect is so we don’t mistake it for the more lasting rotation that comes from higher real yields.