The outperformance of cyclical sectors, value, small caps is “a strong signal on economic reflation as is the increase in interest rates and the steepness of the curve over the past couple weeks,” said Goodwin. “It’s the same message.”
Two months into the year, energy producers have surged 26% -- with the group posting its best month on record relative to the S&P 500 in February. Banks have jumped 16% in 2021. Meanwhile, value stocks enjoyed their best performance relative to growth shares since 2000.
John Hancock Investment Management has added to more rate-sensitive cyclical parts of the market, but that doesn’t mean it’s dumping high-quality companies.
“When you think about cyclical areas of the market that have started to do well, you think about things like energy. The balance sheets aren’t as attractive there,” said Emily Roland, the firm’s co-chief investment strategist. “We still want some of those names with good balance sheets, good return on equity. It’s really about finding a balance between the two as we look forward throughout the rest of the year.”
--With assistance from Vildana Hajric and Claire Ballentine.
This article was provided by Bloomberg News.