Chart of the Day - Wednesday, August 11th, 2021

Today’s Chart of the Day was shared in a note by Frank Cappelleri of Instinet (@FrankCappelleri). It's a chart of the 10-year US Treasury yield (red) over the past 14-months and a ratio of the Russell 2000 vs. the Nasdaq 100 (blue). Frank explains that the 10-year yield has been driving a lot of the rotation in the stock market since the March 2020 low. The 10-year yield took a breather today after a 5-day winning streak, and it's currently sitting in a pretty interesting spot pinched between the 50-day and 200-day moving averages (not shown). This recent rebound in yields has benefited Cyclical/Value areas of the market, most notably the Financials. On the other hand, it has slowed the momentum in Growth/Tech areas of the market. The Russell 2000 has more weighting in the Financials than the Nasdaq, which is heavily weighted towards Tech. So, if rates continue to bounce in the near term, we'll likely see the Russell 2000 outperform the Nasdaq after several months of underperformance. Bull markets thrive on this sort of rotation, but it can be painful if you're overweight the wrong areas of the market at the wrong time.