So much for any stock rotation, except from Tech stocks in to Tech stocks…
The Nasdaq continued to shine on Monday with Emerging markets following as the other major gainer. Today’s gains bring YTD performance for the Nasdaq to 25.5%, outpacing the S&P by more than 20% and outpacing Small Caps by 35%+.
Recent rallies in global stocks have narrowed the gap between them and the S&P. Again, the equity story of the year has continued to be the performance of the Nasdaq and it’s constituents, who have proved impossible to conquer.
On the fixed income side, Junk bonds on long dated bonds led the day while floating rate securities lagged.
This recent recovery in Junk bonds has led them to an almost break-even performance level for the year, climbing from a period in late March when they were down more than 20%. On a longer timeframe, long dated bonds have been the clear winner as COVID forced the Fed to lower rates to zero, with no end to zero rates in site.
From a factor standpoint, Q3 has been a story of reversal from an ever-so-brief period of Value and Small Cap outperformance, back to the prevailing theme we have seen in the markets over the past decade, Momentum and Growth.
Since the financial crisis, the gap between Growth / Momentum and Value / Small Cap has been as pronounced as it has been in decades.
These gaps have led many market watchers to question the efficacy of Small Cap and Value investing as prudent investment strategies. While I don’t agree with these opinions, I can admit that the performance gulf between these factors has become pretty jarring.
On the earnings side, corporate reports continue to come in better than expected, though expectations for many companies were set about as low as you can go.
Tomorrow we get to hear from Coca-Cola, Lockheed Martin, Phillip Morris, United Airlines, Capital One, and Snap Inc. Should be a good all-round set of earnings spanning great swaths of the economy. Conversely, we see very little tomorrow on the economic data front.
What We’ve Been Reading
What’s going on with California home prices
Covid shouldn’t take our eyes off the financial reform ball
Active management had a chance to outperform, but alas
Schools and outside learning as a way to slow the spread
Native communities and renewable energy
And near and dear to my hear. Lets not take apart NEPA please!