Case for Cyclical/ Value Sectors
August 17, 2020
Thus far, investors haven’t been using growth stocks as a funding source for increased positioning in cyclical/value sectors. Still-light broad equity positioning, record cash balances and an unconvinced investor base (some recency bias combined with more than 3 years of head fakes) are the main factors keeping markets from experiencing a more acute rotation.
Tantrums: Consensus is probably looking for vaccine approval in the November/December time frame. It’s worth mentioning that an earlier than expected vaccine approval and coincident spike in bond yields could be an underappreciated/overlooked risk for the S&P 500.
Chartist: The former record high of 3393 is now technical resistance for the S&P 500. As expected, the SPX has lost momentum on the approach and a pullback to support around ~3200 is probably the most likely near-term technical scenario.