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Wilson also said he sees more disadvantages for small caps and high growth cyclicals, such as technology and consumer discretionary. "With the S & P 500 capped upward on a valuation basis, it's more likely that Value will outperform by decreasing less or just not falling," he wrote.
Wilson said he is now expecting asset dispatchers to consider moving from growth to value, a call launched in July.
According to Wilson, in addition to the new unemployment rate, the ISM services and the hawkish comments of Federal Reserve Chairman Jerome Powell, returns could have risen last week on the political scene with the prospect of a $ 50 million hike. a Republican turnaround in Congress. The markets were waiting for the Democrats to return to the House and the GOP to a majority in the Senate.
"If the market begins to believe that a Republican movement is likely to occur halfway through, the likelihood of an extension of tax cuts, infrastructure spending and the Further trade protectionism is increasing and we consider that these potential policy paths are inflationary and likely to add to the deficit, providing upward pressure on rates, "he wrote.
He said the difference between the Republican movement that pushed rates up in 2016 is that the policies the market was waiting for at the time, such as tax cuts and tax expenditures, were causing an immediate increase in growth. This will probably not be the case after the mid-term elections, and the economy also has less downturn at this stage, he added.
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