The chances of a broad sell-off hitting the stock market in the first half of 2021 are diminishing as rolling corrections hit certain sectors, Fundstrat’s Tom Lee said in a note on Friday.
Since the start of the year, technology and growth, energy, and small cap stocks have all experienced sell-offs of at least 10%, Lee highlighted.
“Because of this recent suite of rolling corrections, we believe the prospects for a larger correction in 1H2021 have largely diminished,” Lee explained.
Tech stocks have sold off on fears of inflation and rising interest rates, while energy and small cap stocks have taken a breather in recent weeks after staging over-extended rallies on the reflation trade.
The change in leadership within the stock market has led to a choppy range of trading, with tech and energy switching places for 2020 and 2021. Tech is now the worst performing sector within the S&P 500 so far in 2021 after being the winner in 2020, while the energy sector is the best performing so far this year after suffering in 2020. Read more