By Barbara Kollmeyer, MarketWatch
Bone up on the term “market rotation” if you want to hold your own at the water cooler these days.
Deutsche Bank strategist Jim Reid and his team define that term best as a “big unwind in some popular trades.” In the last couple of days, investors have been intensely pulling money out of momentum stocks — those that have had the best returns over the past year — and into so-called slow-and-steady value stocks. It’s sort of like trading your pet hare for a tortoise.
For examples of the companies that fall into these categories, check out the holdings of iShares MSCI USA Value Factor ETF /zigman2/quotes/210105323/composite VLUE -0.07% and iShares Edge MSCI USA Momentum Factor ETF /zigman2/quotes/201303785/composite MTUM +1.56% .
The Wall Street Journal’s Daily Shot
Of course, some analysts say more time is needed time before we can really call these moves a trend.
Diving right into the debate is our call of the day from a team led by J.P. Morgan’s global head of quantitative and derivatives strategy, Marko Kolanovic, who says this value switch may be promising.
“In summary, we believe the value rotation can continue and the broad market could move higher going into October [trade] negotiations, and if real progress is made, continue into a more sustained rally,” they tell clients in a fresh note.
Alas, Kolanovic says the broader S&P 500 may not see much of the glory here, given the index is heavy in companies less ready to pounce on good economic news. It’s full of bond proxies — defensive stocks that could be substituted for low-returning bonds — and companies resistant to short-term trends.
Small-cap, cyclicals, value and emerging markets equities may get much love out of a global upturn, he says.
The Dow /zigman2/quotes/210598065/realtime DJIA -0.07% , S&P /zigman2/quotes/210599714/realtime SPX +0.48% and Nasdaq /zigman2/quotes/210598365/realtime COMP +1.29% are inching higher at the start. Gold and the dollar /zigman2/quotes/210598269/delayed DXY -0.09% are up, while oil is climbing ahead of U.S. inventory data due later. Meanwhile, OPEC cut its oil-demand forecast for 2019 and 2020.
Europe stocks /zigman2/quotes/210599654/delayed XX:SXXP -1.44% are up on trade hopes and easing expectations for Thursday’s European Central Bank meeting, while Asia markets /zigman2/quotes/211618636/realtime XX:ADOW -1.21% finished mostly higher.
This morning may have marked the first time President Trump voiced support for negative interest rates, in a mini-tweet storm early Wednesday.