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The outcome of the 2020 US presidential election, coupled with positive news on vaccines late last year, has resulted in a significant shift in market dynamics, David Lebovitz, Global Market Strategist at JP Morgan, informs.

The “average stock” has been outperforming

“As the prospect of a robust economic recovery and higher inflation have materialized, interest rates have risen and long-forgotten value stocks have begun to outperform. At the index level, this has two implications – the percentage of S&P 500 stocks beating the index has increased, and the ‘average stock’ has begun to show signs of life. This has left S&P 500 gains somewhat muted in aggregate, but the performance beneath the surface has been fascinating.”

“Simply owning the best performing stocks was a good approach for quite some time, but as we have seen, momentum can turn sharply. This is when being active and diversified pays off.”

“We continue to see many investors are overweight growth and underweight value. Although we are not inclined to chase recent performance, it seems reasonable to expect that a more balanced approach to equity markets could help investors navigate what remains a very uncertain world.”