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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