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Liquidity Reversal: The Rotation Trade Speed Bump

Featuring: Ed Harrison and Jack Farley

The rotation trade has hit a speed bump. As COVID-19 hospitalizations continue to rise, what's next?

  • November saw record-breaking appreciation in value stocks, cyclicals, and small-caps, likely due to positive vaccine news, a smooth election, and central bank liquidity hitting the market.
  • Rising COVID-19 hospitalizations will impact economic behavior; if hospitals become overrun, the reimposition of severe lockdowns can do serious damage.
  • The value rotation trade will face challenges in the coming months and it is unclear which companies are positioned to benefit.
  • Uncertainty around the virus may cause a rotation back into stay-at-home stocks like Zoom.
  • The momentum for the rotation has slowed somewhat and this could be the beginning of a longer-term reevaluation of value over growth.

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