Nasdaq trails Dow for fourth consecutive week, longest streak since 2016

Investors are finally leaving tech stocks after a decade of outperformance.

For the fourth week in a row, the highly technological Nasdaq Composite followed the Dow Jones Industrial Average. It’s the longest streak of its kind since April-May 2016, which was also the only year since 2011 that the Dow Jones beat the Nasdaq.

Market experts have been predicting a tech cooldown for years and have always been wrong, thanks to the growing dominance of mega-cap companies like Apple and Amazon, the frenzy around Tesla and the massive shift in spending to cloud computing. .

“It’s been years of frustration trying to make this business successful,” said Jack Ablin, who oversees $ 12.5 billion as Cresset’s chief investment officer.

Ablin said this time it was different. Starting in the fourth quarter, his company rolled out a new “quality dividend strategy”, moving customers from technology to industrial, financial, materials and energy companies. He was betting on a Democratic sweep in November, followed by a big stimulus package that would inject money into the economy, leading to higher inflation and interest rates.

The 10-year Treasury hit its highest level in over a year on Friday, reaching as high as 1.642%. Rising rates encourage investors to shift money to fixed income securities, while inflation tends to have a disproportionate impact on growing companies as it dampens expectations of future earnings.

Meanwhile, the $ 1.9 trillion coronavirus relief package President Joe Biden signed on Thursday will send direct payments of $ 1,400 to most Americans, and will also expand the child tax credit and provide rental and utility assistance.

Add to that Biden’s statement that all adults will be eligible for a Covid-19 vaccine by May 1, and the economy looks set for a big rebound in 2021.

“There is a pent-up demand to go out and do things, take vacations, go to bars and restaurants,” Ablin said. People are going to “take all that money out of the sidelines and spend it,” he said.

Even though Biden and the Democratic Congress are focused on expanding green energy alternatives, the current prospects for travel and return to work benefit traditional oil and gas companies. Within the S&P 500, energy stocks are the best performers this year, up 40% as a group. The best performing groups this week were consumer discretionary stocks, real estate and utilities.

The Dow Industrials Index rose 4.1% for the week to close at a record high 32,778.64. After three consecutive weeks of decline, the Nasdaq climbed 3.1% to 13,319.87. For the year, the Dow Jones is up 7.1%, while the Nasdaq has gained 3.4%.

Ablin knows it’s too early for a victory lap. Even though technology is generally underperforming, there is still a lot of money to invest in even more speculative assets. Bitcoin nearly doubled in value this year and on Wednesday a non-fungible token (NFT) by artist Beeple sold for more than $ 69 million in an auction through Christie’s.

Ablin said he was just asked about NFTs by a client on Thursday. While admitting to not having a strong take on them, he said that if stimulus fund recipients opt for risky investments instead of traveling and buying consumer goods, the market could be very different in the future. the coming months.

“If it’s really not spent, but brought to market, that would take the carpet out of our thesis,” Ablin said. For example, he said, “If instead of taking their vacation, they’re going to buy Tesla shares.”

Tesla shares have jumped 16% this week. But that was after falling 30% in the previous month.

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