Not A Lot Of Upside Potential Left For Tech Stocks During Second Lockdown - Harrison

Today was a day of heavy selling across sectors as COVID-19 cases surge to unseen levels, Ed Harrison told Real Vision during today’s Daily Briefing.

Harrison said he’s thinking about three themes that have emerged in the markets: the risk-on/risk-off trade, higher inflation/higher yields vs. lower inflation/lower yields, and rotation into value over growth. The biggest questions people are asking themselves to deal with those macro themes are how quickly can a vaccine be administered at scale, how much damage will the virus do before the vaccine is administered at scale, and how much impact will that damage from the virus have on the economy, he said.

Harrison said that if the vaccine is delayed or if a lot of economic damage happens before it comes into play, the bullish, steepening yield curve scenario won’t come to pass and we’ll instead see a flattening of the yield curve and equities will sell off. That’s what we saw today; there was a significant move in 10-year rates and a rotation out of the value over growth scenario. Today was a reversal of the reversal, he said.

Is the move into value over? Harrison said the initial reaction to the vaccine news caused the massive move into value over growth, but the jury is still out in terms of the three questions he mentioned earlier. He believes that it is likely there will be more economic damage from the virus and the price action we’ve seen today is much more reflective of the downside risk that’s apparent as a result of the virus. Another lockdown will be bad for equities, particularly value stocks, he said.

Harrison believes that tech stocks will continue to perform well, but said that a lot of the uptick has happened already, so he doesn’t see a huge amount of upside on the second go around.

“People will go back to restaurants, hotels, and air travel,” he said. “The narrative emerging from recent trading activity says that the lifestyle that we are experiencing right now is totally unsustainable and nowhere near the post pandemic daily lives that we will have.”

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This is pretty obvious, but we should probably say it anyway so that there is absolutely no confusion... The material in REAL VISION GROUP video programs and publications (collectively referred to as "RV RELEASES") is provided for informational purposes only and is NOT investment advice. The information in RV RELEASES has been obtained from sources believed to be reliable, but Real Vision and its contributors, distributors and/or publishers, licensors, and their respective employees, contractors, agents, suppliers and vendors(collectively,"Affiliated Parties") make no representation or warranty as to the accuracy, timeliness or completeness of the content in RV RELEASES. Any data included in RV RELEASES are illustrative only and not for investment purposes. Any opinion or recommendation expressed in RV RELEASES is subject to change without notice. RV Releases do not recommend, explicitly nor implicitly, nor suggest or recommend any investment strategy. Real Vision Group and its Affiliated Parties disclaim all liability for any loss that may arise(whether direct, indirect, consequential, incidental, punitive or otherwise) from any use of the information in RV RELEASES. Real Vision Group and its Affiliated Parties do not have regard to any individual’s, group of individuals’ or entity’s specific investment objectives, financial situation or circumstances. RV Releases do not express any opinion on the future value of any security, currency or other investment instrument. You should seek expert financial and other advice regarding the appropriateness of the material discussed or recommended in RV RELEASES and should note that investment values may fall, you may receive back less than originally invested and past performance is not necessarily reflective of future performance. Well that was pretty intense! We hope you got all of that - now stop reading the small print and go and enjoy Real Vision.