S&P 500 was down ~2%, Dow was the hardest hit down ~3% and Nasdaq managed to end the week only slightly underwater.
High growth stocks actually performed pretty well. ARKK which I consider a proxy for high growth, was up ~2%.
Inflation trade was hit hard, probably due to profit-taking. Surprisingly, banks also sold off presumably because of the flattening of the yield curve.
Taken as a whole, it seems like a partial reversal of the growth-to-value trade earlier this year.
I’m keen to watch whether this rotation back to growth continues this week. This might indicate confidence in the Fed’s willingness and ability to control inflation by raising interest rates. Underlying this sentiment also is confidence in the strength of the economy being able to support higher wages and prices.
As a long term investor, I like these rotations because they present opportunities to get into out-of-favour stocks despite no change to fundamentals of the business.
Since the growth-to-value rotation started mid-Feb, I’ve been adding to my growth stocks, something I’ve been wanting to do for some time but couldn’t bring myself to at lofty valuations.
Last week, I took the chance to add to my core position in the Vanguard Total World Stock ETF (VT) after the decline. I’ll continue to average in but I’ll still maintain a 10-20% cash position. I’m wary about a potential market crash in the later part of the year after we’ve had a huge bull run since March last year.
Have a great week in the markets ahead!
What are you watching or buying this week?