Weak Hands, Credit Cards and The Growth to Value Shift
That didn’t take long. Quickly coming back to yesterday and my thoughts on strong hands and weak hands from yesterday. Joe Weisenthal at Bloomberg posted this chart on Twitter. It shows the inflows and outflows to and from the ARK Innovation ETF over the past year. As it became clear that Cathie had become the star manager of the moment, people flooded into the fund. The after a short hit to performance, the fund had record outflows yesterday. So much for believing in the long-term view. Maybe this will prove to be a great trade, only time will tell. It will be fun to watch either way.
Getting back to my “things are getting better” line of thinking, the credit card companies are the next data point that confirms my view. American Express, Visa, Mastercard and Capital One are all trading at or near five year highs.
There isn’t much more to say about it at this point. Things are getting better and the market is reflecting it. Reflecting it across asset classes: stocks up, commodities up, treasuries down / yields up. The question now is what will lead. Commodities are still under-owned in my opinion. They probably always will be. Most people are not comfortable owning them with futures contracts and some of the ETFs present challenges from a tax prep perspective. But more broadly, most investors are hardwired to think about stocks and bonds and how they mix to make a portfolio. Commodities are an afterthought at best.
The biggest development in the stock market is a possibly massive shift that is taking place from growth stocks to value stocks. Growth has been leading value since the Global Financial Crisis (the line moving up and to the right). Growth companies are the one creating the future. Value stocks are mostly the past: banks, oil drillers, miners, etc. It’s fun to own the next great growth company. Everyone wants to find the next Apple. No one brags about owning Exxon Mobile. Stories of value investors shutting down their funds have been fairly common over the past few years.
I don’t know how this is going to play out but I don’t think being all-in on growth is the best way to structure an equity portfolio at this point.
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*Nothing in these pages should be considered investment advice.