Pfizer’s vaccine announcement sent stocks higher overall, but hit some favored by lockdowns, such as Zoom, while others related to leisure, such as Delta Air Lines, have soared. Stocks that have been performing well lately are hit the hardest. And the US 10-year bond has jumped more than a sixth to 0.98%, indicating that investors have less appetite for the definitive safe asset and possibly expect more inflation.
Wall Street analysts suggest this could signal a revival in stocks. value, which have been underperforming for some time, as investors divest themselves of the fastest growing companies. Investors who previously sought safety from the pandemic in skyrocketing tech may now be willing to hold stocks more dependent on general economic activity, including those that include physical presence.
But looking at it as a value versus growth dichotomy could be a mistake. It is true that the S&P 500 Value Index has risen 5%. But one of its biggest assets, as of October 30, was Pfizer, and another was Berkshire Hathaway, which disclosed massive stock purchases two days earlier. Credentials value they were probably not the main driver in either case.
Investors have gotten rid of tech, but the shift to stocks that should benefit from a return to normalcy earlier than expected indicates a rational shift in expectations, not a shift in strategy, especially when the Fed is expected to keep underlying rates low for years.
The traditional concept of value is also being called into question. A paper Recent suggests that metrics such as the market value comparison with the accounting one do not capture the true value of intangible assets, such as brands, that proliferate in many of the companies growth. Some trends can be reversed, but the redefinition of investment categories is something that should continue.
The authors are columnists for Reuters Breakingviews. Opinions are yours. The translation, of Carlos Gómez Down, it is the responsibility of Five days