Three reasons to prepare for a resumption of the rotation into cyclicals – UBS

Economists at UBS see several reasons investors should prepare for a resumption of the rotation into cyclicals that took place earlier this year and consider rebalancing their portfolios after the rally in mega-tech stocks

See – S&P 500: Boom economic conditions, better or worse matters more than good or bad – Charles Schwab

Investors should be careful to avoid overallocation to mega-cap tech companies

“Catalysts for further mega-cap gains appear less obvious. More investor visibility on mega-cap share buyback plans may offer some near-term support, and companies are likely to use any share pullbacks as an opportunity to repurchase shares. However, we appear to be entering a less compelling quarter for mega-cap tech with limited product refreshes and upgrade cycles until the ramp-up into the year-end holiday season. More demanding YoY growth comparisons may also limit the scope for major earning beats into the second half.”

“The tactical outlook favors the reflation trade. Part of tech’s surprising resilience in the first quarter can be attributed to reopening setbacks, while a pause in the rise of US Treasury yields has lent support in recent weeks. But we don't expect either trend to extend further into the second quarter as vaccination progress, fiscal spending, and pent-up demand give a fresh boost to cyclical sectors such as financials and energy. In addition, the earnings outlook for cyclical and value sectors appears more reliable on the back of recovering growth compared with the high bar mega-cap tech firms will face as one-off pandemic drivers fade.”

“Growth and regulatory outlooks support a rotation within tech, too. As the growth outlook for mega-cap tech normalizes toward more incremental gains, we expect markets to seek out the strong long-run growth outlook offered by earlier-stage small- and mid-cap tech companies. A more combative US regulatory outlook may be another driver. While regulatory impacts tend to be transitory, any short-term hit to dominant tech firms could lead to mid and small-cap tech firms outperforming.”


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Are you new to trading or have been trading for a while and you feel stuck?

Try with us!
Become Premium!

Latest Forex News

Latest Forex News

Editors’ Picks

EUR/USD rises toward after US retail sales miss estimates

EUR/USD is holding onto its gains above 1.21 after the US reported no change in April's retail sales, below 1% expected. The Control Group plunged by 1.5%. The dollar is falling across the pond. US Consumer Sentiment missed with 82.8, yet inflation expectations surged to 4.6%.


GBP/USD trades below 1.41 after US consumption data

GBP/USD is trading above 1.4050, benefitting from the better market mood. Sterling is shrugging off worries about the spread of new virus variants, which may delay the reopening. US retail sales missed estimates, causing jitters. 


XAU/USD rallies back closer to multi-month tops, around $1,840 region

Gold could be on the verge of a lower low, but the hourly time frame is key. The hourly support structure is guarding a break to test bullish commitments at 1,800. The 10-day EMA and confluence of the 50% mean reversion are also offering support. 

Gold News

Dogecoin bulls hold the key for 40% gains

Dogecoin price is at a pivotal point, resulting in a 40% upswing or 30% sell-off. A swift surge beyond $0.522 and a retest of this level confirms a bullish outlook. If DOGE slices through the $0.351, it will put an end to the optimistic narrative.

Read more

AMC Entertainment Holdings surges on triangle breakout, targets $14.54 and $20

AMC has done it again and in the process is stealing the GameStop crown. Supposedly a movie about the whole GameStop saga is in the works, but if AMC has its way it will be stealing the show. Coming to an AMC theatre near you: "AMC to the moon". AMC closed Thursday at $12.77 for a nice gain of 23.7%, thank you very much.

Read more