Value stocks are those generally unloved companies in old fashioned sectors with strong profit potential whose share prices have been left behind in the rush for hotter industries. These include tech stocks which have risen in value consistently since early last year, making them classed as “momentum” stocks.
Since the vaccine breakthroughs last October, value stocks have risen consistently and dramatially. That, the FT reports today, is ironically making them perform like momentum plays.
While this may all sound like semantics, it could be important in the real world, because some investment funds specialise in only backing value or momentum categories. As value stocks consistently rise, the multi-billion dollar momentum funds may have to start including them in their momentum portfolios.
Morgan Stanley Investment Management’s Andrew Slimmon told the FT momentum funds will have to rebalance from tech and healthcare to energy, materials and industrials, potentially further fuelling the momentum behind their strong gains.
The FTSE 100 was being called up a modest 11.2 points at 6943.1 by the IG trading platform.
A slow start was also being called by CMC Markets on European indices, with the Dax in Germany down 5 points at 15,204 and the Cac40 in France down 3 at 6205.
The FTSE outperformed continental rivals partly because of gains in value sectors like oil after the price of crude rallied strongly, boosting BP and Shell.
Weakness in Chinese markets this morning held back Asian stocks, CMC reported, predicting that would follow through into trading in Europe.
A late selloff in tech stocks on Wall Street is also set to be a factor, and one which killed off some of the early buzz around Coinbase’s blockbuster float. Launched at $381, it jumped to $428 in early trading before closing at $328.
The London Stock Exchange Group may get a boost from reports that its biggest investor Lindsell Train was backing a major, rapid investment in its new Refinitiv business.
Long standing problems at the data company which it just bought for $27 billion will take big money to fix and LSE’s shares fell a fifth last month as a result.
But Lindsell Train told investors the strategic sense of the takeover was still strong and urged the company to invest “more and sooner if necessary” to make it work.
Refinitiv’s Eikon terminals, used by traders and other market operators, suffered an extensive outage knocking them out for several hours last week. With Bloomberg and other rivals snapping at Refinitiv’s heels, that added to concerns about LSE’s new acquisition.
Markets will today be looking out for US retail sales data for March this afternoon as well as the weekly unemployment data there. The labour market has been recovering rapidly and the volatile weekly data is expected this week to swing from a decline in jobless claims from 744,000 to 700,000.
March retail sales are likely to benefit from the government’s stimulus payments to households with expectations of a 5.8% increase reversing February’s 3% decline.
CMC says plenty of folks in the market consider that forecast too pessimistic and some have even pencilled in a 10% surge.