October 5, 2021
The Fed is talking about tapering which has sent treasury yields to their highest levels in three months (about when the delta variant began to spread rapidly).
- Generally, growth stocks, such as in the technology sector, have fallen as a result of the treasury yield spike.
- Investors caught in the middle are singing the same reflationary trade song from back in May and are flocking to value stocks, such as energy and financials, which have cyclical reopening qualities.
- However, growth doesn’t look quite as sluggish, and this might keep these stocks rolling a bit longer.
Supply side factors in energy in particular will keep value strong beyond interest rates falling or inflation being more than transitory.
FINSUM + Magnifi: Value stocks typically require this middle ground of moderate inflation and moderate growth. It could push investors back into growth, or even push the whole market down, if either increases or declines too sharply!
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