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SG penny stocks may rally.
Stocks that got slammed amid fears of higher-for-longer interest rates caught a second wind during the roaring November market rally.
The S&P regional bank index (KRE) rose more than 16% during the month, including a more than 2% gain on Wed. Cathie Wood's flagship Ark Innovation ETF gained more than 34%. Meme stocks re soaring too, with the broad $ROUNDHILL MEME ETF(MEME.US$ rising more than 20% in Nov and meme stock favourite GameStop moving up over 20% on Wed alone.
The small cap $Russell 2000 Index(.RUT.US$, which had been largely avoided due to fears that high interest rates would sink small companies, gained more than 9% in the month.
"Traders have decided that even though it's still earning nearly 5%, cash is trash compared to quick profits in a wide variety of risk assets," Interactive Brokers chief strategist Steve Sosnick wrote in a research note on Wed.
Sosnick adds that the root of what he described as a fear of missing out, or "FOMO" rally, is the "expectation that rates will be coming down, and that is indeed a solid reason for a rise in risk assets."
Fears of nother Fed rate hike had weighed on the broader indexes and particularly on tech stocks, between the Fed's Sepmeeting and the one on Nov. 1.
When the S&P 500 bottomed in late Oct, institutional investors were caught "flat-footed," eToro US investment analyst Callie Cox told Yahoo Finance. According to a measure by the National Association of Active Investment Managers, investors were their least exposed to equities in more than a year.
So as signs of cooling inflation built a case for investors to believe the Fed may not only be done hiking but could even cut rates soon, they piled into interest rate-sensitive sectors throughout last month in an effort to "performance chase," Cox said. Real Estate and Technology gained more than 12% in Nov while Financials and Consumer Discretionary (XLY) rose more than 10%.
"Many [institutional investors] are rushing into these high-duration sectors, which is powering the rate cut trade, and that could last until the end of the year," Cox said.
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