22 Jul YESTERDAY WAS THE INVERSE OF MOST DAYS…VALUE LED OVER GROWTH
Yesterday was the inverse of most days. Equities led by value rose but the megacap tech shares fell. There is speculation Congress will agree to a fresh relief package, the amount however is under discussion. The range is anywhere from $1.3 trillion to $3.5 trillion. Wow! These numbers are unfathomable!
Many times, I have commented about the historic gap between value and growth. Year to date small cap value is down 22% and large cap growth is up 14.7%. The gap is greater if the NASDAQ 100 is used as a proxy.
Statistically this is a fourth standard deviation trade, an event that only occurs 0.50% of the time. In other words, there is a 99.5% chance that small cap value will outperform large cap growth.
For those who have suffered the decade long massive underperformance in value shares, someday can not occur soon enough. Some will write the massive underperformance between value and growth commenced around 2005.
No one knows when the rotation will occur. It could have started yesterday or maybe it will start in two years. What is certain, however, fortunes will be made and lost.
What will happen today?
Last night the foreign markets were down. London was down 0.89%, Paris down 1.07% and Frankfurt down 0.34%. China was up 0.37%, Japan down 0.58% and Hang Sang down 2.25%.
The Dow should open nominally lower after another diplomatic flare-up between China and America. China’s Houston consulate was ordered to close to “protect intellectual property and private information. And then there are earnings. There is growing consensus the mega sized technology concerns are priced considerably higher than even the most optimistic expectations.
The 10-year is up 3/32 to yield 0.59%.