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Mish Schneider Can big tech recover from its recent drop?

In this article, Mish Schneider, director of trading research and education at MarketGauge.com, considers the potential options in value stocks following big tech’s recent decline.

Monday’s strange price action looks as though the market shrugged off the stimulus money in some areas but not in others.

While there are many factors at play, the most notable shift is in big tech, which continues to show weakness.

The tech heavy Invesco QQQ ETF [QQQ] sold off through the day, showing a shift from growth stocks into value stocks as yields rose rapidly.

Monday, the Vanguard Value Index Fund ETF [VTV] broke to new highs while Vanguard Growth Index Fund ETF [VUG] continued to break down.

Is it possible that, after 12 years of seeing growth over value, with every correction a buy opportunity for big tech, the reverse is now true?

This change could mean that every dip is now an opportunity to buy value stocks instead.

The last time value overtook growth gains for an extended period was around 2002-2007.

This came after the dotcom bubble, which peaked in 2000. While the dotcom bubble is completely different to a pandemic, it is interesting to note.

Of course, any reversal in yields could take many oversold tech stocks into a dead cat bounce.

But for now, growth and tech were the Debbie downers of Monday.

One sector their influence did not reach was the transportation sector. The iShares Transportation Average ETF [IYT] broke to new highs.

This sector indicates investors’ confidence that travel will continue to reopen along with an increase in the flow of goods.

Therefore, as we watch for further economic recovery, IYT remains an important leader moving forward.

This article was originally published on MarketGauge. With over 100 years of combined market experience, MarketGauge's experts provide strategic information to help you achieve your investing goals.

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

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