The rotation in the Trump era's big losers has been extreme…

The rotation in the Trump era's big losers has been extreme…

2. december 2020 fra Mikael SydingLæsetid: 4 minutter

… since news of Biden's victory and several positive vaccine results have been published.

Four very promising vaccine studies have recently been published and several hundred are in line. At the same time, the United States has finally seemed to be able to decide that Biden won the US presidential election. Following these announcements, the stock markets have rushed to new all-time highs, while the shutdowns of many countries to prevent the spread of Covid are more far-reaching than at the peak in April. How to think about different industries and asset classes when the whole sea is storming? In my role as portfolio manager, I spend my days outlining what are actually fundamentally motivated movements and more reflexive and short-term reactions. In short, I believe that the rotations and directions we have seen over the past month will soon be turned upside down, even if there is no exact reversal. In any case, I believe that one should be prepared for continued rapid movements in the elephants' attempts to position themselves for a new future with Biden, vaccines and viruses.

The biggest loser in recent years, the energy sector, ie oil companies, has been extremely strong in the US over the past month, ie since the first vaccine news was published. Another winning sector in November is banking and finance, which is also one of the losers of recent years, alongside communications and real estate. Perhaps Biden's increasingly secure victory over Trump has also contributed to the rotation.

Technology stocks, the healthcare sector and utilities (electricity & water) are at the bottom in the last month, and it is mainly the technology sector that has emerged as a total unthreatened winner over five years, with healthcare as a relatively distant second. Over ten years, however, it is fairly even between technology and healthcare at the top. And even there, the big losers are called oil, communications and real estate.

The developments of the last month, with an upturn in economically sensitive sectors and Fly Away shares, feels like an extreme outcome due to a mostly only seemingly changed game plan. Biden is not that different, and the results of the vaccine studies do not matter that much. No, the long trends continue to speak for technology stocks and healthcare. It is semiconductors and software, as well as what can be done with technology in the form of, for example, social media and online entertainment, that drive the economy forward. In addition, we are getting older and have an increased need for care for a longer period of time, at the same time as government funding of care is facilitated by progressive ideas such as Modern Monetary Theory MMT.

The reflex reaction is probably largely over, and then the oil companies can once again start praising concerns about the sustainability of the economy and the oil price. Ordinary banks could then fall back again due to future credit losses in the wake of continued Covid problems and a constant erosion of profitability due to innovative fintech companies and thin interest rate spreads.

If you look a little more closely at different industries and segments, the falling gold price (and also Bitcoin, but to a somewhat less worrying extent the silver price) has dragged the previous winners among gold mines straight down in recent months. The gold mines are still extremely profitable even at today's gold price level of 1800 USD / oz, and technically the gold price seems to bottom out here. Gold and gold mines could have many years of strong tailwinds ahead of them in the form of QE and MMT, which are driving the increase in the money supply. The post-Covid winners extraordinaire, green energy and semiconductors, admittedly also have the future ahead of them, but the upward movement since the end of March is too extreme for my simple taste, so I dare to believe in a big technical setback there soon. A bit like Bitcoin.

Summarizing the thoughts above, I shall take a closer look at buying gold mines, defense companies like Raytheon, Huntington and Northrop as well as cryptocurrencies like Bitcoin and Ether. I intend to finance the purchases with shortfalls in banking, oil and aviation, all of which could be both short-term and long-term losers from here. Health care also attracts a little on the buying side, but right now it looks like the prices "want" a little further down first.

US Sectors 5 Years

US Sectors 3 Months

@Mikael Syding

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19-04-2021 14:21:20


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