Retail investors with less experience may be struggling to adjust because they’re familiar with the prominent technology companies. However the market often passes through multiyear cycles. Understanding changes in investor sentiment can help traders avoid areas of weakness and focus on new opportunities.
The Federal Reserve’s in a tricky spot this week, committed to dovish monetary policy as the economy roars back from the coronavirus pandemic.
The rotation away from large Nasdaq stocks like Tesla has intensified, resulting in the market’s biggest divergence since the dotcom bubble broke a generation ago.
The SPDR Industrial ETF (XLI) set a new all-time closing high on Friday, while the SPDR Technology ETF (XLK) slid for a third straight week. The divergence follows a new trend of investors shifting toward value stocks that can withstand higher interest rates. They’re also looking for companies that can benefit from faster gross domestic product.
First, the change can be explained by higher interest rates and higher commodity prices. This is stoking demand for “cyclical” companies like industrials and financials that benefit from more gross domestic product. Many of these companies struggled before the crisis and are now being rediscovered for the first time in years.
Executives told investors revenue will grow more than 50 percent annually for “multiple” years, according to reports on Reuters, Bloomberg and CNBC. That’s more than 12 percentage points above the previous consensus estimate for next year.
Twitter (TWTR) is up 27 percent since Friday, February 5. That makes it the best-performing member of the S&P 500 for the period. It’s also the biggest weekly gain for Jack Dorsey’s social-media company since February 2015.
In December, Market Insights noted how money was shifting away from large, well-known companies to smaller and less-known companies.