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Cyclical Strength Ahead

Cyclical Strength Ahead

August 30, 2021

Key Takeaway

Equities maintained trend strength in August and avoided breakdowns that would have triggered a shift to cash. Portfolios are positioned for relative strength in small-caps and other neglected areas of the market. The rally appears to be broadening ahead of seasonal weakness, and we anticipate cyclical sectors to outperform on pullbacks into year-end. 

Financials, healthcare, and industrial sectors make up a large portion of the value index, and show greater upside potential versus growth stocks over the intermediate term. The chart below shows value approaching support relative to growth, albeit within a long-term downtrend. 

Value/Growth Relative Chart