The rotation continues after a week that has seen a substantial increase in volatility. In the chart below, taken from the market monitor at Fund@mental, you can see how the market is moving by factor. The Growth and Momentum ones are lagging after being the ones leading for months; the index (ACWI) and Quality factors are in the middle, and Value and Core dividend are leading since the start of July, perhaps in anticipation of a Fed’s pivot. The correction on growth and momentum has been almost -7% over the last 2 weeks, which has weighted on the Nasdaq. Portfolios may need to adjust for the second half of the year if this trend persists, as institutional money is leading the way to a more defensive stand. Short sellers are likely to accelerate the rotation, working as a catalyst betting on demanding valuations on growth mega caps.
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