“Bullish Shift Propels Positive Movements Forward

With the onset of the new year, the markets are taking renewed vigor as bullish rotation continues to drive gains. Though the past few weeks have seen volatility due to the Fed’s rate cuts, traders have been able to make gains by taking advantage of this dislocation. At the forefront of bullish rotation has been technology and communication services stocks, which have been bolstered by strong earnings and optimism around the post-pandemic economic recovery. These stocks have been on a tear since the pandemic began, propped up by consistent marketplace demand for their goods and services. Looking ahead, many of these companies are expected to continue their impressive performance, generating further gains for the market. Another sector that has been experiencing bullish rotation is financial stocks. The Federal Reserve’s interest rate cut in December has caused banks to make more money on their deposits and consequently, increase their profits. This has, in turn, led to a rise in the stocks of banks, brokerage firms, and other financial services companies. Beyond the gains due to the Fed’s rate cut, some financial stocks have also received a boost from expectations of greater market optimism due to potential additional fiscal stimulus and a vaccine-driven recovery. Bullish rotation is also playing out in the consumer discretionary sector, which has been bolstered by a plethora of opportunities for retail investors. Investors have been flocking to consumer-facing stocks, cheered on by the holiday shopping season and the expectation of increasing demand due to a projected economic recovery. With earnings and macroeconomic catalysts in play, many investors have been confident in the recent bullish rotation. This can be seen in the recent performance of the S&P 500, which has enjoyed consecutive advances for seven weeks straight, and the Dow Jones Industrial Average, which is trading near its all-time highs. The bullish rotation seen across the board signals further gains ahead for the market. In any case, caution should still be exercised as investors must remain cognizant of the macro-economic environment and the unpredictability brought forth by the coronavirus pandemic. Nevertheless, the bullish rotation seen across various sectors indicate that the markets are in a strong position to capitalize on further gains in the near term.