NEW YORK, Feb 11 — US stocks that took a beating last year are surging in the early weeks of 2023, leading markets higher. Some investors believe that trend is unlikely to last.
A range of factors are driving the moves, including the attractiveness of beaten-up shares, a tailwind from falling bond yields and market participants unwinding bearish bets against stocks. Greenwood Capital recently sold at least a portion of its shares in some 2023 winners, including Meta Platforms and Netflix. Meta is up 45 per cent so far this year, while Netflix is up almost 18 per cent. Those stocks fell 64 per cent and 51 per cent last year, respectively.
While falling yields often increase the allure of equities in general, they are particularly beneficial for the technology and growth stocks whose valuations suffered when yields shot higher in 2022. “The market leaders to-date ... are vulnerable to the higher-for-longer interest rates and a slowing economy,” strategists at the Wells Fargo Investment Institute said in a note Thursday. “We do not view the recent breadth and leadership as sustainable — yet — and prefer not to chase equity rallies at this time.”
“Either the deterioration last year from an overvalued space is over, or this is a dead cat bounce in a wounded large sector and the bear market of last year is not over,” Kotok said. “I am in the latter camp.”Since 1990, the three best-performing sectors in January went on to post an average return of 11.3 per cent over the next 12 months versus the S&P 500’s average gain of 9.3 per cent over that time, according to investment research firm CFRA Research.