I continue to believe that rising real long bond yields mean we have seen the peak in growth stock versus value stock outperformance, and the chances of a genuine growth stock correction are increasing by the day. This is a major market development and one that shouldn’t be ignored. It is time to take profits in high flying, expensive growth stocks, expensive small caps, and expensive defensives, and either rotate to value or move to the sidelines and hold some cash.
Below I am going to quote directly from an equity strategy note titled “The Tipping Point” by Morgan Stanley’s chief US equity strategist Mike Wilson, as I think it’s an excellent and succinct summary of where we are at.
The Tipping Point*