Morning all! Just wanted to post quickly about the recent sector rotations going on, and the overall market selloff. Typically we post our sector updates on Tuesday, but the market continues to selloff so some might get some use out of this directly.
Clearly, the focal point of the market is rates, which have been climbing on stubbornly high inflation. Supply snarls and the energy crunch have cropped up before the supply chain issues could dissipate (and thus reduce prices for goods), and now we are at a point where the market is pricing in higher inflation and a quicker taper than expected - hence the high multiple tech selloff.
And, given that high multiple tech is like 30% of the indices, it's easy to see why we are where we are over the last month.
We think that *all* of this will ultimately clear up over time, but that energy and financials, two sectors that do well in value-tilted/inflationary periods, are most favored at the moment. We think that super-macro deflationary headwinds will prove too hard to defeat in the long term, but that that doesn't matter on a day like today. In times like this, we are sticking like glue to our capital flows models, despite the long term thesis. We'd rather make money than be right.
We are not bidding for any tech stocks anytime soon, but expect to be doing so should the market continue down 10-15% more, especially in the ARKK high mult arena. Some interesting names we like include: TTD, NET, CRWD, MKTW, and most of the semis.
Agree with that there are large deflationary forces in the future....surprisingly the market has not recognized this... Making this dip an incredible opportunity. Imo we should be more worried about deflation than inflation.
PropNotes
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@lonercapitalist, yeah but with gas prices where they are it's tough for people to contextualize
Mihai_Iacob
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Thanks for sharing
adamvibeo
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this is def not a buy
PropNotes
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@adamvibeo, agreed, steering clear of (high growth, even higher-mult) until rates and economic calendar cools. Oct seasonally volatile though so some opps might crop up