- If economically sensitive stocks lead the market recovery, as we expect, history would repeat itself.
- Many cyclical companies, such as global industrial conglomerates, capital-rich banking institutions, and travel & leisure companies, should experience a substantial rerating.
- With over 50% of the ACWI index invested in the lowest Covid-19 beta sectors, passive index investors appear to be underexposed to upside recovery.
“People should value manufacturing–the world of atoms vs. the world of bits–far more. It is looked down upon by many, which is just not right.” -Elon Musk
Although less controversial than some of Mr. Musk’s recent tweets, markets appear to disagree with his tribute to the physical over the digital. This year-to-date’s sector winner in the MSCI ACWI Index (“ACWI”) is information technology, with software & services devouring the world of atoms. In the volatile first five months of 2020, these companies trafficking in bits rose nearly 10%,