Much like value’s surge last week, such a sharp move is symptomatic of someone covering their bet against a factor or taking on a new factor position, Lapthorne said. Though tax reform could trigger the flows, it still looks like systematic action that doesn’t lend itself to a lasting rotation, he said.
“We’ve seen this before,” Lapthorne said. “Everyone makes a song and dance that tech stocks have fallen, but then you scratch below the surface and it looks factor-led.”
The idea may have gotten some support Tuesday. The biggest companies recovered some of their losses, with pure momentum posting the best gain in more than two weeks.
This article was provided by Bloomberg News.