Investors have begun to switch back to traditional growth stocks

On Thursday, the stock prices of Cisco, Alphabet, and IBM hit new highs. But more importantly, the previously unpopular speculative growth stocks, including stocks bought by many ARK funds, have now begun to rebound.

How is this going?

Investors' perspective on the market is changing. In the first quarter of this year, mainstream voices in the market believe that the economy will restart strongly, bond yields will rise, and inflation may become a problem later this year. After the end of the first quarter, these expectations were only partially fulfilled.

The U.S. economy has indeed restarted strongly, but bond yields fell in the first quarter instead of rising because investors began to believe:

1) Inflation and supply chain disruption may indeed be "temporary", as the Fed insists;

2) The second and third quarters will be the highest points of stock returns and economic growth.

Alec Young, a chief investment officer of Tactical Alpha, said: “Trading in value stocks is slowly declining, and those who are long-term bullish on growth stocks are reaping benefits. Bond yields are representative of growth prospects.” He pointed out that bond investors see inflation in the second half of the year. The growth rate will slow down.

This keeps investors in the stock market, but they are turning to defensive stocks (healthcare stocks) and growth stocks (tech stocks).

Why would investors switch back to growth stocks?

Alec Young commented: "The value is biased towards industrial, energy, materials and small-cap stocks, so they are very sensitive to economic changes. When coming out of the recession, value stocks are better investments and their earnings leverage is higher. ."

"But the problem now is that the U.S. economy has entered a period of recession at a very fast rate, and now it has emerged from the recession at a very fast rate. Now, growth stocks are more able to withstand the unpredictable effects of the business cycle than value stocks. Provide higher returns."

Ben Snider and David Kostin of Goldman Sachs agreed. They recently stated that "historical data, stock valuations, stock positions, and economic slowdowns indicate that the rotation from growth stocks to value stocks is about to pass."

The two Goldman Sachs bankers said: "Mutual funds value stocks more than ever. Although hedge funds still prefer growth stocks, they have been very cautious about growth stocks recently.

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