Back in November, right around the time of the election, we saw the beginnings of a big rotation out of pandemic winning stocks (i.e., tech) and into beaten-down small-caps, value, and names in travel, hospitality, and energy.
Trendy stocks like Zoom, Peloton, and Tesla were pandemic darlings in 2020. People were working from home, exercising from home, and becoming more environmentally conscious. You can see from the chart below how laggards such as Chevron, United Airlines, and Norwegian Cruise Lines performed in comparison. It's easy to understand why these names would underperform given the pandemic.
But looking ahead, how things have changed!
Year-to-date, this stock chart has practically flipped. Peloton, Tesla, and Zoom are way off their highs, with Peloton significantly down almost 20% thus far. On the other hand, Norwegian Cruise Lines is up nearly 31%, United Airlines is up 28%, and Chevron more than 22%.
The stock market is a forward-looking instrument, and that's what's going on here.
It's what happened last March, leading to a surge in tech shares, and it's happening again now. The market is looking towards an economic rebound and reopening, even though we're not there yet.
Consider this too. Look below at how copper, a vital metal to our everyday lives (and to electric vehicles, renewable energy) and a strong barometer of economic activity, has performed year-to-date.
Other stocks that you would expect to perform well in a "reopening" scenario, such as Live Nation, a company that operates and manages ticket sales for live entertainment, and Kohl's, a brick and mortar retailer, have been on a roll.
Our take. Picking and choosing isn't easy though. High-flying stocks are sexy, and they get our attention. But if you keep a balanced and diversified portfolio, you'll be much better off in the long-term. One sector may be hot, while another lags. But as you've seen here, it could flip tomorrow.
If you're interested in learning about how to value stocks, take this bite-sized lesson: