The economy may be recovering from the shock of the pandemic, but it’s clear from where investors are putting their money that they remain concerned about just how long it will take for life to return to normal.
Throw in the potential for a second wave, the uncertainty around a U.S. election and the potential for a Canadian one this fall and it isn’t surprising to see investors herd into segments of the market that are perceived to be “safe,” in particular high-flying technology stocks.
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As a result, the ultimate contrarian trade nowadays has become one that positions for a broader recovery.
Interestingly, despite record low interest rates and trillions of debt-induced fiscal stimulus,?the bet against a recovery has been so profound that according to Bank of America research, value stocks have posted their worst decade ever and have given up 20-years of relative gains in the last three years. They are also trading at their biggest discount to growth stocks ever, including the dot-com bubble.