One of the most interesting things coming out of Covid-19 is the rapid recovery in the markets. It could be because of onset of stimulus either on the fiscal or monetary.
Covid is accelerating the trend that were already underway. Ecommerce is really taking over the world, at least from how investors are allocating capital.
The chart of Russell 2000 vs Nasdaq shows that tech is vasly outperforming value.
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I think there is a reversion play here as investors are getting out of hand in the tech space. The excess from Robinhood account is fleeting and there is real downside once the market catch up with the performance of the underlying economy.
Why is Nasdaq beating Russell 2000?
One of the key reason Russell 2000 lags Nasdaq is because Russell 2000 is made of more small cap stocks. Small caps looks to be more susceptible to broader economic slow down. This is not one of those times to catch a falling knife and think Russell 2000 returns will catch up.
How do we take advantage of this trend?
One idea relative trade idea is through going long Russell Index (IWM) and Short Nasdaq (QQQ) via passive index funds.