- Major equity indices mixed once again
- Rotation toward value stocks continues
- Global capital markets performance excellent year-to-date
- Domestic bond yeilds remain range bound
As was the case last week both the Dow and the S&P 500 rose this week while the NASDAQ Composite slipped. Returns for the week were muted. It does appear the rotation we have been experiencing continues. An excellent article appeared in the WSJ Friday looking at the rotation in detail. As outlined here last week there has been a rotation out of the Technology sector into the Telecommunication and Financial sectors. The WSJ article (Growth Still Beats Value in Stock Fight by James Mackintosh– page B1) goes into further detail on the rotation. In fact, what is happening across every S&P 500 sector is movemen from growth to value stocks. The article argues that part of the rotation is a consequence of the gains growth stocks have realized versus value stocks this year and really since the sub prime crisis. To provide perspective, this year alone, growth stocks have outperformed value stocks across the board (meaning in the large, mid, and small capitalization spaces) on average by better than a 2:1 margin. The larger question posed by the article is whether this is simply a result of growth stocks being overbought and expensive or does it signal a more permanent rotation based on the expectations that economic growth and inflation will pick up meaningfully? Time will tell but clearly the long slow grind higher of the domestic equity markets and growth stocks is a function of the low domestic economic growth and lack of inflation for several years now.