Asset Watch
Thursday, May 25, 2023
The grey line below tracks the DJI/NDX ratio, and when it rises, the Dow is outperforming the NASDAQ 100. However, the sharp decline on the right side of the chart shows how Big Tech has gained the upper hand in 2023.
Since higher interest rates are typically bullish for cyclical stocks and bearish for technology, the black line shows how the ratio has largely followed the U.S. 10-Year Treasury yield since 2022. And with the latter rising while the former falls, a material divergence has emerged.
Should you buy the rates trade and rotate into cyclical stocks, or is Big Tech still the safest bet?