Stock Rotation Into Value — How Long Could It Last?

Published by Adam Sarhan on 03/15/2021

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I’ve been discussing the “tale of two tapes” for the past week or so… And today I’d like to delve into the mini stock rotation into value we’re seeing as people move out of tech stocks.

In a nutshell… You have the Nasdaq and growth stocks that have been lagging for the past several weeks after being the leaders out of the pandemic.

Meanwhile… the areas that are back to normal, like in the Dow, the S&P 500, the Russell 2000 and the MidCap 400, are leading. So there’s a tale of two tapes… And if you’re into growth, Nasdaq 100, Cathie Woods’ Ark Innovation-type stocks, where they had been leading since March 2020 up until a few weeks ago, there’s a shift going on… a stock rotation into value.

The 2021 ‘Mini’ Stock Rotation Into Value

Now the Nasdaq has wrung out some of its overbought state and become oversold, while value stocks have taken off and become overbought. So Nasdaq names are due to bounce while value stocks are due to pull back.

This doesn’t mean the stock rotation into value is over. In fact, we could see value stocks pull back while Nasdaq and growth stocks surge ahead again. But we have switched sides and there’s a mean reversion happening, and it’s totally normal to see.

I call it the great mini rotation. It’s a “mini rotation” because a “rotation” on Wall Street generally refers to moving out of stocks into bonds. So a mini rotation is under the surface, where one sector leads and takes off, then it corrects — or pulls back — and then another sector leads.

So what does it all mean?

Check out my short video on the stock rotation into value, and let’s chat about what comes next for the market.

And as always, please like and subscribe to our YouTube channel and podcast, “Smart Money Circle,” where I interview some of the most brilliant minds in the business. You can also follow me on Twitter, and read more of my thoughts on the market at WealthPress and on Forbes, where I’m also a contributor.