As market teeters on exhaustion, here’s why value stocks are still stuck in the mud

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A curious part of the stock market right now: the continued terrible performance of value stocks.

Yes, the major benchmarks are hitting records seemingly daily. But on Tuesday, the S&P 500 SPX, +0.49% closed near its low of the day after making an all-time high, creating what technical analysts call a shooting star. “This is often a sign that a reversal is fomenting due to exhaustion,” said Jeffrey Saut of Saut Strategy. He said the next two days are important for determining whether the rally will continue.

In a note to clients, Wellington Management says what’s going on is that the tail risks on trade have been removed—in other words, the worst outcome of the trade war has been avoided—but the market isn’t convinced growth prospects are improving. And that is why the political situation will be so key for the stock market going forward. “Potential catalysts for change include deglobalization or a heightened regulatory environment better suited to today’s economy,” the fund manager says.Sen. Bernie Sanders won the New Hampshire Democratic primary, with former Mayor Pete Buttigieg coming in second and Sen. Amy Klobuchar finishing third. Entrepreneur Andrew Yang and Sen. Michael Bennet both ended their presidential runs.

Federal Reserve Chairman Jerome Powell generated few headlines in his Tuesday testimony to the House Financial Services Committee, other than being at the receiving end of a critical tweet from President Donald Trump. On Wednesday, Powell will testify in front of the Senate Banking Committee, starting at 9:30 a.m. Eastern, while Treasury Secretary Steven Mnuchin will go before the Senate Finance Committee at 1 p.m. to discuss the budget.

 

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