According to a report by Deutsche Bank strategist Parag Thatte, mega-cap growth and tech stocks have surged 14% since late July, reaching record highs, while the broader S&P 500 has declined by 3% during the same timeframe.
The analysts noted that the relative performance of these stocks is currently in the upper half of its long-term trend channel, indicating that while the sector is performing well, it has not yet reached its maximum potential.
The positioning in mega-cap growth and tech stocks is approximately 0.8 standard deviations above neutral, which is considered overweight but still below previous peaks, such as in early June when it was in the 99th percentile. Additionally, there has been a notable increase in single-stock options volume for mega-cap growth and tech, while sectors like energy have seen a decline in volume.
Deutsche Bank believes that this rotation is advanced but still has room to continue, emphasizing that the volume of rates, rather than their level, will be crucial for equity performance