Here's a thought. About a month ago, I wondered out loud that whether the defensive sector rally could be better characterized as the outperformance of Value over Growth stocks (see A Value rally, or a defensive sector rally?)
Now that cyclical (and growth oriented) sectors have surged relative to the defensive sectors, the Value stocks have similarly pulled back against Growth stocks. The chart below of the Russell 1000 Value Index relative to the Russell 1000 Growth Index shows that the relative uptrend of Value vs. Growth is still intact.
If my analysis of Value vs. Growth is the more appropriate framework, then it may be time to start buying Value now (and it may represent the third way in the cyclical vs. defensive sector debate of whether the cyclical rebound is a fakeout or true revival).
Disclaimer: Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. ("Qwest"). This article is prepared by Mr. Hui as an outside business activity. As such, Qwest does not review or approve materials presented herein. The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest.
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