Last year at this time (11/30/19), we expressed an emerging preference for cyclical/value sectors when global manufacturing PMI crossed into expansion territory at 50.3. At the time, the global manufacturing cycle was responding to expectations for a US-China trade détente. The global economic effects from
The market-cap weighted S&P 500 (SPX) is on track to gain +11% for the month of November, while the equal weight S&P 500 (SPW Index) is on track to gain +15.5%. Years of Tech outperformance have left the SPX with a 25.7% weighting to the
Next week includes earnings for a number of SMID-cap cloud software/growth companies including ZM (Monday pm), BOX/CRM (Tuesday pm), CRWD/OKTA/SNOW/SPLK (Wednesday pm) and DOCU (Thursday pm). Cyclical and value sectors have been in favor since the PFE/BNTX vaccine data hit on Monday 11/9, while the
The 2007 financial crises started the current period of disinflation, which has led to a 13-year cycle (so far) of growth sector outperformance. Massive monetary stimulus with some limited fiscal measures were put in place to arrest the recession and reflate the economy. But in
The market remains focused on vaccine headlines for a third consecutive week. And reports discussing the potential for inoculations to begin next month could continue pulling attention away from rising US infections and hospitalizations. Post-Thanksgiving new case counts and hospitalizations will be watched closely and
The S&P 500 (SPX) has spent this week consolidating post-election and vaccine-related gains from the prior two weeks. Investors were holding record cash balances coming out of spring lockdowns and into the election. The decision to hold excess cash was driven by emotion and the
Having cleared technical resistance at ~3581, the S&P 500 should have an easier time pushing higher. Our intermediate concern is based on extreme bullish sentiment from the AAII survey from 11/12 (second highest on record) and positioning data that suggests above-average equity weightings among CTAs,
The preference for value sectors continues with the S&P 500 Value Index (SVX) up +10.47% since October 1 vs. the S&P 500 Growth Index (SGX) up +4.78%. While there’s been no ‘rotation’ out of growth, there has been some ‘rotation’ from momentum stocks with the
The November BofA Global Fund Manager Survey noted cash levels fell to 4.1% from 4.4% last month. This level is now below pre-pandemic levels and dangerously close to 4%, which the survey providers consider as a ‘sell signal.’
The market response to the MRNA data will be less violent than last Monday given elevated expectations, but value sectors should see, at least a few days of outperformance. After a few days, investor attention will again be split between vaccination anticipation and what could
