The Beginning of the End?

Something changed in the market today. The winners became the losers and the losers became the winners.

With beaten down names like airlines, cruises, and retail bouncing, and the winners like Clorox and Regeneron lagging, the market is sending a message of hope that this is the beginning of the end of our battle with COVID-19.

Being long the “stay-at-home stocks” has been the trade of the year. Going into the weekend, an equal-weight basket of Zoom, Slack, Teladoc, and Pelton was up more than 200%. Today, these four names had their worst day relative to the broader market since March 24th, the day after we bottomed.

If there has been one theme that has emerged throughout this whole episode it has been the dreadful returns in value stocks, particularly small ones, compared to large tech stocks. Prior to today, the NASDAQ-100 was up 5% on the year while small value was down 35%.

Value investors experienced a reprieve today, with the outperformance of the laggards versus the leaders seeing its largest one day change since October 2008.

The stock market behaved as if today was the beginning of the end of our battle with COVID-19. Time will tell.

The market doesn’t always get things right, and we have a long way to go, but it’s nice to have at least a glimmer of hope.