The rally and the great rotation

Markets have surged in the US session with the Dow Jones reaching record highs of 30,000 and the S&P500 tracking very close to another all-time high. So far, markets have been experiencing the benefits of optimistic investors who are gauging the prospects for a better global economy in the new year.

In the Dow Jones, only three companies saw losses yesterday with the remainder of the index’s members seeing gains bar Johnson & Johnson who remained flat in the session. The three losers for the day were Merck, Procter & Gamble, and Amgen, all three companies (four if we count Johnson & Johnson) have been apart of the pandemic growth cycle as health-related entities.

Dow Jones (Monthly) – Even Boeing the drag on the DJ, climbed 5% in yesterday’s session.

In the most recent 24 hours, we have had several significant events that affect the long-term perspectives of Investors. First, we have seen President Donald Trump directed his staff and the GSA to begin the Transition process. Second, we have witnessed President-Elect Joe Biden nominate former Federal Reserve Chair Janet Yellen for the position of Secretary Treasury. And third the announcement of the combined AstraZeneca and Oxford University vaccine.

Each of these events on their own carries a significant weighting to investors renting plenty of space in their thoughts about the current economic environment; which gives us an indirect insight into the hearts and minds of investors, who are focusing on political and economic news of positive origin.

The vaccine rally has continued pushing higher, now an increasing number of order flows are entering the great rotation of growth stocks into value stocks. More and more analysts are moving into bullish waters, beginning to ignore the short-term prospects of further restrictions, particularly in the united states and in Europe were cases of covid-19 are surging rapidly daily.

The near-term expectation on the global economy is almost entirely inverse save for the idea of vaccines in manufacturing and distribution, not much lines up with investor perspectives. The standard line of ‘stock markets don’t reflect the economy now, they reflect the future’ rings in my head, but can we justifiably say that this is still the case anymore? The short-term narrative and the long term prospects never match, but the divergence at its current is rather extreme. While I am bullish; I feel there are still too many unknown hypotheticals, for overweight portfolios to be making a come back just yet.