• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Stocks

Come on Market, Which Is It: Growth or Value?

October can be a tricky month. But all asset classes are linked to U.S. dollar right now.
By MALEEHA BENGALI
Oct 09, 2020 | 01:15 PM EDT

Over the last week, the narrative of a Biden presidential win seems to have changed a bit.

The market is cheering those prospects with implications of a much higher fiscal stimulus to come, which would be much more market friendly, offsetting the tax increases Biden promises to enact if he were to be elected. Meanwhile, the U.S. dollar, after its recent rally in September, it is now starting to fall as the prospects of a deal become clearer.

With that, investors and portfolio managers are chasing the economically sensitive names and sectors such as energy, financials, industrials (e.g. value) and selling out of technology (e.g. growth) names. This shift out of growth into value has been the hot debate across various trading desks, given the huge divergence that has emerged between the two. But what has really happened?

Since September, this relative trade has really gone nowhere. Other than a few days of violent rotation out of one into the other, the net effect has been muted and not really made any headway. Excited cheers aside, if one were to do a price graph going back two months, there really has been no change.

There are two schools of thought here. If you believe that a fiscal deal is going to be passed soon, then of course most hedge funds and portfolios will rotate some capital out of technology, which has been the leader for the past year, and allocate some into bombed-out names such as banks and energy. On a six-month+ horizon this may make sense, especially if one is trying to lock in gains from over the past two years. But it may still be a huge opportunity cost for tactical investors as they could be three months too early.

It doesn't really matter who is elected president, as a fiscal deal is going to be passed. The U.S. economy needs it, and it cannot recover and grow without it. Even Federal Reserve Chair Jerome Powell said this, in effect pleading Congress to do something on the fiscal side as the central bank has got its hands tied on the monetary side. The Fed's balance sheet is bloated at $7 trillion and no matter how much it prints, it cannot stimulate growth and the economy, it can only sustain asset prices and buy time.

But the pleas are falling on deaf ears as neither party is interested in helping the economy or the people, they are only interested in winning the election and picking on each other like kindergarten kids.

After the initial lockdown re-opening, U.S. economic data was very strong as it was coming from absolute zero levels. Of course it was V-shaped. However, over the past month or so, the data is showing signs of stalling, slowing down. The economy is running out of juice and needs another boost, unemployment checks and more job growth. Without this the U.S. consumer cannot spend and companies cannot grow.

The longer we wait to get a fiscal deal, the more of a growth shock we will get going into the election. Markets do not like uncertainty and it is at a bit of an inflection point. For now, it is just shifting its preference between two groups of stocks. The broader top-line index is really not making any headway for now.

October can be a tricky month. But all asset classes are linked to U.S. dollar right now. Deal or no deal, the dollar will fall or rally. The answer to those questions will dictate your asset and stock allocation.

Charts will not tell you where the market can go, only where it can get to once the direction is set. Still, one has to take a view. Be in the growth camp or the deflation, slowdown camp. Since, it is only a matter of when, not if a fiscal deal will be done, the question is will it be here or 10% lower?

If you have a view, run with it, but be prepared to withstand the volatility, especially if your stocks move down 15% before moving higher 20%. Then again, no one really doubles down on a position when it is 15% against you, do they?

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.
TAGS: Banking | Energy | Technology | Currencies | Federal Reserve | Investing | Jobs | Markets | Stocks | Trading | Value Investing

More from Stocks

Don't Just Sit There and 'Hope' for Your Stocks, Make a Decision

James "Rev Shark" DePorre
May 27, 2023 10:00 AM EDT

The biggest investing and trading mistake that people make is that they don't have a plan.

Nvidia Caught Traders Off Guard, Will Debt News Do the Same Soon?

James "Rev Shark" DePorre
May 26, 2023 4:57 PM EDT

We got a broad rally on Friday after a week of narrow action -- but once the debt ceiling news hits, the market will go on to the next stage of action.

Here's What Should Recharge Tesla's Rally

Bruce Kamich
May 26, 2023 3:45 PM EDT

I have a new price target for now.

Costco Slows But Should Do Well in a Tougher Climate: Here's the Trade

Stephen Guilfoyle
May 26, 2023 11:30 AM EDT

The company could use the extra revenue that an increase in membership fees would produce, but it has been reluctant to go there.

Stocks Are Climbing a 'Wall of Worry'

Bret Jensen
May 26, 2023 10:55 AM EDT

I'm constantly looking for opportunities in this overvalued market.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 09:48 AM EDT CHRIS VERSACE

    Latest AAP Podcast With Portillo's CEO!

    Listen in as we talk with a rising star in the Chi...
  • 03:25 PM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Don't Just Sit There and 'Hope' for Your Stocks, M...
  • 07:32 AM EDT BOB LANG

    Webinar Thursday After the Close: Option Spread Trading

    Thursday, my good friend and colleague Sam DeMarco...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login