The rotation into tech which started in late July still has room to run, Deutsche Bank said. Mega-cap growth and tech stocks are up 14% since the end of July to a record high, compared with the rest of the S & P 500 which is down 3% over the same period, according to a report led by Deutsche Bank strategist Parag Thatte. The relative outperformance of mega-cap growth and tech stocks has “risen to the upper half of its long-run trend channel but is not yet at the top,” the analysts noted. Also, the positioning in megacap growth and tech has risen to about 0.8 standard deviation above neutral, “clearly overweight but well below prior peaks” in periods such as early June when it topped out in the 99th percentile, Deutsche Bank said. “Within single-stock options, volume in MCG & Tech rose sharply, followed by Consumer Cyclicals, Industrial Cyclicals, and the defensives,” Deutsche Bank said, adding that volume for energy stocks declined, while volume in materials and financials was nominal. “The rotation is now advanced but still has some room to run,” DB said, adding that it continues to see to see the [volume] of rates and not their level as key for equities.
