Key Takeaway
The pullback in equities occurred during a spike in Treasury yields last week, which is negative for growth stocks. Higher yields means that earnings over the next few years are worth less today. So, stock prices and valuations for tech heavyweights are starting to decline along with earnings expectations.
Our indicators have shifted to risk-off this week, which is consistent with our higher cash positions over the past month. We also positioned for relative upside in the equal-weight S&P 500 index, which helped to reduce overall portfolio risk. Value stocks appear attractive, which could benefit sectors such as healthcare, consumer staples, financials and energy.
Relative Gains in Equal-Weight S&P 500
Source: Cannon Advisors, TradingView
Upside in Value vs. Growth
Source: Cannon Advisors, TradingView