The strength of the recent rally in cheap stocks could trigger a rare shift in equity market dynamics that some investors expect will fuel the gains of financial and energy companies.
For much of the past decade, so-called momentum stocks have been on fire, layering gains upon gains. Meanwhile, unloved “value” stocks have limped behind, frustrating a generation of fund managers who made their reputation eking out equity market bargains.
Since November’s coronavirus vaccine breakthroughs, however, value stocks have benefited from their high sensitivity to economic cycles. Now, they are climbing fast and consistently enough to start classifying as momentum stocks as well. It is an uncommon union of two normally conflicting market “factors” that could send billions of dollars that typically chase trends towards once-shunned value shares.