So what did investors do during the past 2 day sell-off? Bought Growth.
If you look at the complexion of the flow, the continued outperformance of Momentum (+121bps) and subsequent underperformance of Value (-86bps) ultimately underscored that rotational moves beneath the surface aren’t accompanying index-level risk-off trading.
Instead, the heightened global growth fears have only accentuated a preference for winners (Growth Software, Secular Growth), Quality and Defensives over Cyclicals
Notably, the past two sessions have proven to be the strongest two days for Growth vs. Cyclicals since September.
6 reasons to start buying this market
- China has moved on……Coronacases down and stock market well off lows. This is the blue-print for the rest of the world as well
- When China sneezes…..Last 2 major sell-offs in US equities were China induced (deval fear and trade war) – and proved to be great buying opportunities
- Point of maximum bearishness……Many many examples, but Dr Doom in FT and El Erian on CNBC are 2 noteworthy (“this time it is different…”)
- Systematics created a perfect storm……We entered into this sell-off with CTAs near record long with a need to sell >$100bn if market puked. This has more or less been absorbed now. Buyback bid easily trumps systematic supply
- Volatility at extremes……Market is now pricing “guaranteed” panic
- If the old narrative comes back…….it looks more solid than ever: Yield gap support and Trump re-election probability highest ever
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.