As we’ve noted before, he’s generally been bullish and correct since 2009 in the wake of what he calls the Great Financial Crisis (GFC).
In his latest note, Yardeni shows through charts why the stock market is no longer bifurcated when large technology stocks led and most other stocks lagged.
He explains that the bull market is now broadening out partly as a result of the vaccine news from Pfizer and BioNTech and Moderna. Here are six reasons why.
Strategy: Energetic Value Investment Style. November has been a very good month for the Value investment style so far, led by the cyclical sectors of the S&P 500/400/600, especially Energy.
They were inoculated from the Covid-19 virus on Monday, November 9 when Pfizer announced that it had developed a very effective vaccine.
The bad news is that it has to be stored at minus 90 degrees Fahrenheit. The Value stocks got a booster shot a week later, on Monday, November 16, when Moderna announced that its vaccine required normal refrigeration.
Stock prices soared on the news, led by all the pandemic-challenged businesses. Value outperformed Growth and may continue to do so as the bull market broadens and continues to rise in record-high territory.” So far, so good.
Here are selected performance derbies since Friday, November 6—which might have marked the start of the broadening of the bull market led by Value and SMidCaps—through Friday’s close:
(1) S&P 500/600/400 Value vs Growth. The outperformance of Value has occurred across the spectrum of market-cap indexes: S&P 500 Value vs Growth (5.2%, -1.0%), S&P 400 Value vs Growth (9.3%, 3.4%), and S&P 600 Value vs Growth (12.6%, 8.2%) (Fig. 1).
(2) S&P 500 sectors. Cyclical sectors in the S&P 500 with high concentrations of Value stocks have done well recently: Energy (22.3%), Financials (8.9), Industrials (6.4), Real Estate (3.5), Materials (2.5), Consumer Staples (2.1), S&P 500 (1.4), Communication Services (-0.1), Consumer Discretionary (-1.2), Health Care (-1.2), Utilities (-1.3), and Information Technology (-1.3) (Fig. 2).
(3) S&P 500 industries. Of the 122 industries we monitor, there was an equal number—38—of big outperformers with double-digit gains and big underperformers with losses, all of less than 10%.
Among the top winners were Hotel & Resort REITs (35.0%), Oil & Gas Exploration & Production (31.5), Retail REITs (22.9), Office REITs (18.9), Airlines (15.8), and Hotels, Resorts & Cruise Lines (15.5).
Among the big losers were Gold (-9.5%), Home Improvement Retail (-6.8), Systems Software (-5.6), Internet & Direct Marketing Retail (-5.3), Systems Software (-5.6), and Household Appliances (-4.3).
(4) LargeCaps vs Small-to-MidCaps. The market broadened out, favoring SMidCaps, as follows: S&P 500 (1.4%), S&P 400 (6.0), and S&P 600 (10.3) (Fig. 3).
That makes sense given the following rebounds in the forward earnings of the S&P 500/400/600 from their lows during May and June through the week of November 12: 17.0%, 34.9%, and 57.2% (Fig. 4).
(5) Stay Home vs Go Global. The vaccine news gave a big boost to Go Global relative to Stay Home.
Here is the performance derby for selected country and regional MSCI stock price indexes in local currencies: United Kingdom (8.0%), Europe (6.4), Taiwan (6.3), Australia (6.2), EAFE (5.9), All Country World ex-US (4.7), Japan (4.6), All Country World (2.8), EM (2.4), United States (1.4), and China (-1.4).
(6) Better breadth. The breadth of the bull market is broadening. The S&P 500 is 13.3% above its 200-day moving average, with 86.3% of the companies trading above their 200-day moving average (Fig. 6).
We recognize that this might actually be a bearish signal in the short run. However, only 58.1% of the companies have positive y/y price comparisons, which is relatively bullish.
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