$SPX masks bullish rotation as value and cyclicals take the lead

TopdownCharts
03-02 14:08

Learnings and conclusions from this week’s charts:

  • The S&P500 $S&P 500(.SPX)$ dropped -0.87% on the month in February.

  • (yet the equal-weighted version gained +3.4% in Feb)

  • (rotation remains a key theme)

  • Value vs growth rotation has clear fundamental support.

  • There are still some compelling causes for optimism.

Overall, the rally in cyclicals/value is helping offset tech-troubles (aka bullish rotation), and there is clear compelling macro-fundamental support to rotation (along with the cooling-off from tech/AI hype). We’re probably seeing a classic case of overinvestment in capex on the AI front, but it’s not all bad news…

1. Happy New Month! 

The S&P500 closed down -0.87% for February, placing it marginally up +0.5% YTD. The equal-weighted version however gained +3.4% (and is up +6.8% YTD) — meanwhile the $Invesco QQQ(QQQ)$ dropped -2.3% in Feb (down -1.1% YTD).

2. S&P500 Equal vs Cap Weighted — Rotation

as such, the equal-weighted vs cap-weighted relative performance line has surged higher after previously reaching an extreme divergence from trend. This is a classic rotation trade and it reflects both the large-cap growth/tech side of things running into issues as well as the smaller/cheaper cyclicals seeing better prospects.

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