Tech stocks have been on fire ever since the bottom of the Mar crash and have never looked back. It has left all the other sectors behind to chase, especially banking and energy sectors, the two worst performing sectors for the year. The COVID pandemic has badly hurt these labor intensive sectors. Indeed when the whole country and globally the economy suddenly crashes and is ground to halt, who can further spend money and who needs so much oil?
But everything has a limit either to the upside or the downside. When something has been beaten down too much, it often becomes attractive value-wise. No different for banking and energy. While each stock is different fundamentally and technically, as a whole, both sectors have shown some deep values! On the other hand, the tech sector has shown quite some froth in it after being chased for so long. Technically speaking, it is just a matter of time to see a reversion to the mean. Or in a more fancy word, we should see a rotation to start where the mostly chased sectors to cool down and the most hated sectors to catch up. The great COVID vaccine news may have just triggered the start of this rotation! After all, if the vaccine is indeed effective that can largely control the pandemic, the economy will quickly recover, with which the biggest beneficiary should be banks and energy companies. See the chart below for the few days following the vaccine news. Both banking and energy sectors jumped over 10% while the tech stocks got hammered!
Of course, one or two days cannot become a trend. We still need to see if this rotation can indeed continues but I think the chance is very hard that we are just seeing the beginning of this big trend. Don't be surprised to see more money flow into banks and energy with net outflow from the tech.
Invest and trade accordingly!
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