The Spring Counter-Offensive
After a rough March that was characterized by a broad rotation under the hood of the stock market from the secular winners and into low-quality cyclical companies, secular growth stocks appear to be reasserting leadership. Similar to a front line that can ebb and flow, the battle is ultimately won by the army with the most depth, durability and can execute the battle plan. Moving forward, our research suggests that the market will ultimately reward companies with a durable and reliable pipeline of cash flow growth and can succeed regardless of economic growth.
The message in this week’s market review is that the big rotation into boom/bust cyclical stocks appears to be losing team while companies that are considered long-term growth leaders appear to be reasserting leadership. If our research is correct and secular growth stocks resume leadership, then our strategies should be well-positioned going forward. As for the broader market, strong credit markets and continued bearish Wall Street sentiment have historically been a strong contrarian bullish signal moving.
- Reopen stocks are beginning to cede leadership back to long term growth leaders
- Wall Street strategists remain bearish, which is historically positive for stocks
- Credit markets are in strong health, which signals strong economic health
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