Tech Leads as Market Rotates

It has been a disjointed month for the U.S. stock market. Since the Club's November Monthly Meeting, investors have largely rotated out of old economy shares and back into tech-focused names. Case in point: The Dow Jones Industrial Average posted its 10th consecutive losing session Wednesday — its worst losing streak in 50 years. Overall, the Dow and S&P 500 fell 3.2% and 1.9%, respectively, from the Nov.

14 monthly meeting to Wednesday's close, the eve of our December meeting, while the tech-heavy Nasdaq advanced 1.5%. The reason for the market's divergence is two-fold. First, President-elect Donald Trump's proposed tariff increases, which some economists believe could drive inflation, have influenced parts of the market more than others. Big Tech names, for example, have been able to mitigate this risk by lowering their exposure to China. They have also built more diversified supply chains to offset weakness from higher levies on foreign-made goods. Secondly, the 10-year Treasury yield has jumped since the last meeting. Higher yields typically hurt rate-sensitive, old economy stocks and send investors back to the tried and true mega-cap tech names that are less sensitive. We've been taking advantage of this shift. The Club bought Linde shares Tuesday as investors lumped the stock in with the lagging materials sector, which has been impacted by economic uncertainty. In November, we added to our Dupont position for similar reasons. The portfolio's monthly winners highlight this market rotation. Four of our five top-performing stocks since November's meeting are in tech, including Broadcom, Alphabet, Apple, and Amazon. Bulk retailer Costco was the outlier. Here's how the top names fared over the past 34 days, and what drove the outperformance in each. Broadcom: up 31.2% Most of the gains came after the company's quarterly earnings report last week, with shares skyrocketing 24% in the session that followed the Dec. 12 releas

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