MarketsNov 17, 2020
Power struggle continues — Growth stocks fall and value stocks rise on news of positive vaccine news
Market Rotation
Victor Lei
Discover
The power struggle continues between growth and value.
Growth stocks fell while value stocks soared on the news of positive phase 3 clinical trial results from two vaccine makers:
(Catch up: A quick lesson on growth and value stocks)
According to a BMO Economics report, stocks that struggled most from the pandemic gained the most, while those that benefited from the pandemic fell following the results:
Since the beginning of COVID, investors have favored growth stocks led by tech companies benefiting from stay-at-home trends. Its counterpart, value stocks, have significantly underperformed.
As reported by Lyall Taylor, the power struggle between growth and value has shifted hands 3 times over the past 50 years:
Matt Peron, director of research at Janus Henderson, sees 3 factors that could shift money into value — US elections, Pfizer vaccine, and overpriced growth stocks.
Edward Moya, senior market analyst at OANDA, said tech stocks will continue to benefit from stay-at-home trends and vaccines will take time to be widely distributed.
Richardson GMP, a wealth management firm with under $29b in assets, recommends investors take some of their profits from growth stocks and redeploy it into value stocks.
Value stocks like cruise lines, airlines and theater stocks, that were hit the hardest by COVID, had gained the most on positive vaccine news over the past week.
Does that make them attractive stocks now? Robbe Delaet, contributor at Seeking Alpha, doesn’t think so. Despite rising on initial vaccine news, he warns that the virus had significant disruptions on their businesses financials and that they are unlikely to be good long-term investments.
Then how do you know if a value stock is a good investment? Delaet recommends looking for investments whose long-term perspectives are not affected by the virus. I.e. Amazon, who may continue to benefit from increased online shopping post-COVID.
