High Rates and a Strong Nasdaq Don't Go Together

Even the most crazed technology bull has to be a little winded by the Nasdaq's rise since Oct. 15.

And while it at times feels as if the Nasdaq has been outperforming the S&P 500 (SPX) forever, the real outperformance extends back in time only to the market low of Oct. 8, 1998. The extent of this outperformance is even more remarkable when we consider 34.94% of the S&P 500, as currently constituted, is subsumed by the Nasdaq 100 (NDX).

The more interesting situation may be the strong divergence between the Nasdaq and the S&P 500 while rates were actually rising, an environment that typically benefits value-oriented stocks. ...