Hi All,
So we keep hearing bond yields are breaking new record highs, driven by fears of inflation, which in turn is triggered by the prospect of economies opening up after lockdown. This, it seems, has led to a flight away from high growth (tech, alternative energy, electric vehicle etc) stocks.
High bond yields are accompanied by low bond prices, to reflect reduced demand from institutional investors - despite the reassuring words from most central bankers, yields stubbornly continue edging up whilst growth stocks continue to decline.
If institutional money is leaving both growth stocks and the safe haven of bonds simultaneously, where is that money being invested? I am told its chasing cyclical stocks: house builders, financial institutions, mining companies. I.e., those companies most likely to benefit from an economic upturn. But are we really seeing these stocks move significantly higher in a proportionate response to higher bond yields?
Despite a relatively small rise in a few house-builders (partly driven by the extension to the stamp duty holiday), and miners (continuing the probable commodity super-cycle), Im struggling to understand where most institutional money - freed up from bond purchases and disposal of high growth stocks - is now being invested. I'm obviously missing something - can someone help me understand and/or correct me?
(Most of my portfolio is invested in high growth nasdaq stocks and renewable energy stocks mainly in european countries and the uk - so Ive been hit pretty hard of late).
I'd also be very interested in the peoples' views on:
(i) which sectors they think will benefit the most in the next, say 6 -12 months, as uk lockdown eases.
(ii) whether they would recommend rotating out of growth stocks and into cyclical stocks - as noted in Edmund's excellent post (Market Musings 27/02/21) , too much switching and reactivity can also be counterproductive.
thanks in advance for your thoughts
