Morning Notes — Cyclical/ Value Focus

Our focus has been on adding cyclical/value equity exposure since real yields bottomed in mid-September. Since 9/15/20, the S&P 500 Value Index (SVX) has outperformed, up +23.64% vs. the S&P 500 up +15.87% and the S&P 500 Growth Index (SGX) up +9.58%.  During Q2’21, we expect the relative outperformance of value over growth to widen.  We see 14% upside in the SVX sometime over the next ~2mos vs. +5% upside for the S&P 500 (SPX).  There is nothing ‘toppy’ about the SVX and the index is well supported by several recent breakouts.  We’re using the current period of ‘consolidation’ to add exposure in Financials, Energy and Industrials in that order.  The NASDAQ 100 (NDX) should be able to test its February high (less than +1% from current levels), but will likely struggle to move higher from there.