According to one of Wall Street’s most closely followed quantitative analysts, betting on regeneration and the thriving economy after COVID-19 has failed, but is ready to return, according to a report. of Wall Street’s most closely followed quantitative analysts.
Marko Kolanovic, global head of quantitative and derivative research at JPMorgan, said: “Our view is that trade easing and reopening will continue, with yields going higher and turning. from growth, quality and protection to value and cycle ”.
When stocks initially rebounded from the bear market caused by the COVID-19 pandemic, investors bought stocks of tech companies and others that benefited from the home environment, in the when shares in firms that are more sensitive to economic cycles are left behind. Growth stocks, stocks of companies that are expected to have faster earnings and revenues than peers, benefit. Value stocks have seen long-term inefficiencies compared with deeper growth.
That changed late last fall as the vaccine moved into approval, boosting performance for cyclical stocks, as well as value and small cap stocks. The increase in treasury yields underlined the move, as investors took into account the possibility of a spike in inflation, at least in the coming time, when the economy reopened, the government spent trillions of dollars. to stimulate finance and the Federal Reserve is committed to maintaining more easing monetary policy when the economy is heating up.
But those recycling and recovery transactions appear to have dried up in recent weeks as yields fell from a 14-month high and COVID-19 cases rose outside the US, especially in India. India and Turkey, aroused worries about the global economic outlook.
But now a change back to reopening themes is due and likely it will go far beyond the previous iteration, Kolanovic said.
“With cases in the US and Europe now declining, rapid vaccination rates and seasonal (Northern Hemisphere) winds, we believe reopening and re-trade,” he wrote. Creation will continue with a bigger move than we saw earlier this year, ”he wrote. “The recovery of COVID-19 this spring / summer will be phased with the first US recovery, followed by Europe and finally emerging markets. This will prolong the cycle and prevent yields from rising too quickly and destabilizing the equity multiplier ”.
He expects the beneficiaries to include the energy, finance, materials and industrial sectors, along with small cap stocks and stocks with higher volatility than average.
In the chart above, Kolanovic and his team used bond yields as a measure to represent reopening / reopening on the horizontal axis, while the vertical axis measures the performance of stock market segments. different votes.
“As the COVID-19 recovery progresses, the themes of reopening, recycling and inflation and value will likely outweigh growth and protection,” he wrote.
decreased by more than 250 points, or 0.8%. S&P 500
down 0.7%, while the tech-heavy Nasdaq Composite
down 0.9% and by small cap Russell 2000