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Rotation Was Hitting Markets Even Before FOMC Minutes

James 'Rev Shark' Deporre says abrupt shifts will be intense, but will give way to stock-picking environment.

So far, January, 2022 looks as volatile as any date in 2021 -- and that’s not necessarily good news for stock pickers.

The reason? Rising interest rates are a particular thorn in the paw for triggered traders, leading to some highly aggressive rotational trading.

Even before Wednesday's release of FOMC minutes triggered fears of faster rate hikes -- and a market plunge -- the rotation was fast and furious, according to Real Money's James "Rev Shark" Deporre.

“What’s happening right now is there are huge baskets of stocks being bought and sold in order to shift exposure out of growth and other stocks that are hurt by higher rates,” Deporre wrote recently on Real Money. “A good example of a stock that is benefiting from this rotation [...] is Berkshire Hathaway BRK.A which has heavy exposure to value names like Coca-Cola  (KO) - Get Coca-Cola Company Report  and financial names like insurance.”

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According to, in a rising interest rate environment growth stocks are less valuable because they will produce bigger earnings far into the future. Those earnings have to be discounted to present value, and the higher interest rates are the greater the discount.

The good news is that this sort of rotational action tends to occur abruptly and ends quickly.

“After things calm down, there will be some opportunities for stock pickers to accumulate those names that have been unfairly punished by the rotational algorithms,” Deporre added. “Unfortunately, this rotational action can occur in waves, so it is easy to be caught by surprise when another one hits.”

Get more trading strategies and investing insights from the contributors on Real Money.