January 26, 2021
The move lower in 10-year Treasury yields has created an opportunity to add cyclical/value equity exposure. Bond yields have significant support (price resistance) in the 0.98%-1.00% range (now ~1.03%) and the S&P 500 Value Index has significant support in the 1265-1255 range (now 1287). The longer-term trend is very much intact and the counter-trend move over the past two weeks has largely run its course, which means most of the pullback in cyclical/value stocks has already taken place. The counter-trend move is related to investor realization that large scale fiscal stimulus and vaccine-induced reopening are opposing themes…you get one or the other, but not both. The realization has led to a convenient consolidation in the ‘reopening trade’ before moving higher in the months ahead.