Pfizer’s coronavirus vaccine that sent global stock markets higher on Monday prompted double digit gains in value stocks while growth companies saw their share prices tumble. Is this the long-awaited rotation to value?
Especially technology stocks and gold went down sharply. At one point the price of gold was down 2.6%. Zalando, the e-commerce giant in Europe, lost 15%, contrasting to the 27.5% gain of airline stock Air France-KLM. On the other side of the Atlantic, the S&P 500 was up 3% in afternoon trading. A truly violent and abrupt rotation of the stock markets.
‘The markets expect Biden to come up with a recovery plan. Maybe the need for a little extra stimulus by central banks does suddenly not look so great anymore,’ said Philippe Gijsels, head of market strategy at BNP Paribas Fortis in Brussels, in an interview with Investment Officer. ‘The market response is therefore entirely logical. It is very difficult to navigate these trends correctly however. That’s why we have had a barbell strategy for quite some time now, in which we have been focusing on both secular growth companies and value stocks.›
Allocation
‘You absolutely must have cyclicals in your portfolio now’, Gijsels notes. ‘On the other hand, we don’t want to go completely out of technology either. Hence this barbell strategy. Gold is now going to make some corrections because there will be less stimulus and interest rates may rise a little. That is good news for the badly affected banks and insurers. Within the value sectors, we have a preference for the pure cyclical names such as infrastructure and steel and construction companies. They can benefit from the recovery plans.’
‘On the other hand, we are also ready to pick up technology if this corrects enough. And you also need to keep gold-related stocks in your portfolio. In this world, there’s still a need for real assets,› Gijsels says.