The higher the U.S. bond yield, the greater the pressure on U.S. stocks to rotate

Foreign media articles claim that value investing has come back to life, made up for all the decline caused by the epidemic, and has also reshaped the $2 trillion factor investing industry.

 pressure on U.S. stocks to rotate

A Bloomberg long-short index shows that the strategy of buying low-priced stocks and selling high-priced stocks has fully recovered. In the context of Biden’s large-scale release, a large amount of funds returned to cycle stocks. Evercore ISI strategists headed by Dennis DeBusschere wrote in a report:

“The explosion of value investing has good reasons.”
According to foreign media, value stocks (represented by traditional industries) have continuously attracted capital inflows in recent weeks, and ETFs that track value investments have ushered in new capital for 10 consecutive weeks. Since early November, capital inflows and market rebounds have driven the growth of such assets by 1,000. Billion US dollars, it is expected to get the best-performing capital inflow in history in this quarter, and it is only 5 billion US dollars away from surpassing its rivals—growth stocks (represented by technology).

In other words, value stocks that have been known for their failures over the past decade are now poised to surpass growth stocks, the hottest strategy in the bull market.


Saxo Bank strategist Eleanor Creagh pointed out that the higher the U.S. bond yield, the greater the pressure on the stock market to rotate. Under this shift, investors are abandoning the most favored stocks in the past, while buying cyclical stocks at the fastest rate in history. In view of such strong wheel power, the MSCI Global Index shows that the kinetic energy trading strategy that bet on the winners in the near future will continue to win is suffering an unprecedented loss.

In addition, compared with the sluggish performance since the global financial crisis, the current rebound in value stocks is still relatively small. Evercore believes that with the recovery of capital expenditures, even if the rotation slows down, there is still room for value stocks to rise. The team said, “The macro background still favors value stocks, but the rate of return should slow down.”

In contrast, the analysis pointed out that the Nasdaq 100 technology stocks that are considered to have rebounded oversold, in fact, the rebound is mainly due to the fact that hedge funds are forced to cut short positions to reduce losses, not because those hedge funds really have an interest in technology stocks. interest.

According to data from Goldman Sachs’ prime brokers, although hedge funds have been in net buying for the fifth consecutive day, the ratio between short covering and long buying of hedge funds this Tuesday is 4:1. Although the Nasdaq 100, which is dominated by technology stocks, rose, it did not reflect risk appetite. Some analysts said such a rise may be short-lived.

Earlier, as the Nasdaq 100 fell more than 10% from its record high in February, short sellers increased their bets. According to data from the CFTC, last week’s large-scale hedge fund-based short-selling of the Nasdaq mini futures was the worst since the beginning of October last year. But after the Nasdaq 100 rose 4% on Tuesday, these short positions were squeezed.

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