S&P 500 Index: Rotation? The importance of diversification – JP Morgan
|The outcome of the 2020 US presidential election, coupled with positive news on vaccines late last year, has resulted in a significant shift in market dynamics, David Lebovitz, Global Market Strategist at JP Morgan, informs.
The "average stock" has been outperforming
“As the prospect of a robust economic recovery and higher inflation have materialized, interest rates have risen and long-forgotten value stocks have begun to outperform. At the index level, this has two implications – the percentage of S&P 500 stocks beating the index has increased, and the ‘average stock’ has begun to show signs of life. This has left S&P 500 gains somewhat muted in aggregate, but the performance beneath the surface has been fascinating.”
“Simply owning the best performing stocks was a good approach for quite some time, but as we have seen, momentum can turn sharply. This is when being active and diversified pays off.”
“We continue to see many investors are overweight growth and underweight value. Although we are not inclined to chase recent performance, it seems reasonable to expect that a more balanced approach to equity markets could help investors navigate what remains a very uncertain world.”
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