This crucial moment in the current bull market cycle: Is it time to balance growth and value investment opportunities?

Zhitong App has learned that as technology stocks continue to reach new highs, Lawrence Fuller, the head of investment group The Portfolio Architect, is calling on investors to start paying attention to value stocks. Fuller stated that last week may have marked a crucial moment in this bull market cycle, not because the Pro UltrPro Shrt S&Pro 500 fell for the third time in the past 19 weeks, but because there is a lot of good news.

For example, an excellent February employment report showed a continuous increase in job positions, while wage growth slowed down, indicating a gradual cooling of the job market. This is the deflationary trend that needs to be maintained at the moment, which will lead to a soft landing by the Federal Reserve and the beginning of an easing cycle. As a result, the likelihood of the first rate cut in the futures market in June has significantly increased, with the market widely expecting a full percentage point cut by the end of 2024.

Last week was crucial because growth stocks may have already peaked relative to value stocks. Notably, NVIDIA (NVDA.US), a typical representative of the artificial intelligence boom, saw its stock price rise by over 5% in early trading last Friday, hitting a historic high, only to give back the gains and close more than 5% lower than the opening price.

Perhaps this is just profit-taking following the parabolic rise this year, but such events inevitably raise questions about whether market speculation has gone too far. According to EPFR Global data, as of March 6th, $4.4 billion flowed out of tech funds last week, setting a new record high. The premium of semiconductor stocks over the Pro UltrPro Shrt S&Pro 500 also hit a historic high.

Fuller pointed out that this does not mean that tech stocks have peaked, but more and more evidence suggests that the industry's performance relative to the overall market has reached its peak, and new investment funds may be better directed towards other sectors. The top 10 stocks, mainly tech-related, now account for 33% of the Pro UltrPro Shrt S&Pro 500, surpassing the peak of 27% in 2000. The biggest difference is that today's top ten stocks have stronger fundamentals, indicating that a bear market is unlikely to occur.

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In addition, the price-earnings ratios of these stocks have not yet reached the levels of 2000 or 2020, indicating imminent dangers in the future.

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It is worth noting that some of the "Seven Giants of the US Stock Market" are starting to lose their luster. Apple (AAPL.US), Google (GOOGL.US), and Tesla (TSLA.US) have all underperformed the Pro UltrPro Shrt S&Pro 500 this year and have been in a continuous state of loss. Meanwhile, Microsoft (MSFT.US) is also about to fall behind the benchmark index.

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At the same time, small-cap stocks are starting to outperform the broader market. Bears have always believed that the poor performance of small-cap stocks is the fatal weakness of this bull market, but this situation seems to no longer exist. Fuller expects small-cap stocks to rebound because the market has generally underestimated the potential power of economic expansion.

In the past 100 days, the Russell 2000 Index has outperformed the Pro UltrPro Shrt S&Pro 500 and the momentum is increasing. If investors only focus on the weakening momentum of tech stocks, you might expect a correction or bear market later this year. However, the trend towards small-cap stocks indicates that this may not be the case.

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Furthermore, the change in profit performance is at a critical moment, as the market enters 2024, with value beginning to surpass growth. The comparison indicator is the Russell 1000 Growth Index and the Russell 1000 Value Index, which represent the largest 1000 companies in the market.

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The increase in this rate of change indicates that value may go through a period of outstanding performance, led by industries such as healthcare, finance, materials, industrial, and energy. Fuller believes that the start of the Fed's interest rate cut cycle will further drive this rotation, which should favor industries in the market that focus more on value and are sensitive to interest rates, as well as the continued recovery of the manufacturing sector, as evidenced by the new expansion in the PMI manufacturing survey.

Overall, Fuller believes it is time to rebalance investment portfolios, placing more emphasis on value rather than growth. There are many signs that this shift is already underway. This rotation may hinder a more significant rise in the overall Pro UltrPro Shrt S&Pro 500, as the current top ten companies hold significant weight. However, if investors look beyond the leading tech companies so far, there are still plenty of opportunities in this market.