Investors hoping to capitalize on the November market reversal that was fueled by a rise in bond yields found themselves in an ideal situation last week. Technology and homebuilder stocks were some of the biggest beneficiaries of the reversal, as investors sought to capitalize on the opportunities provided by rising bond yields.
For many, the reversion of yields was a welcomed surprise given the continual decline in yields over the previous few months. The 10-year US Treasury Note yield, a key focus of market investors, jumped from 0.837% to 0.942% in one week alone, providing an attractive opportunity for investors.
Technology stocks were particularly attractive due to their overall growth prospects as the new year approaches. Companies like Apple, Microsoft, Amazon, and Alphabet saw their share prices appreciate notably due to investor confidence in the sector. Investors are betting on the continued development of products and services from these tech powerhouses, which have already demonstrated growth this year amid pandemic-driven digital transformation.
On the other end of the spectrum, homebuilder stocks also proved to be attractive investments in light of the rising yields. Homebuilders have seen a steady trend of appreciation this year as more people chose to purchase new homes amid lockdowns and constrained mobility. Investors looking to capitalize on the sustained rise in housing were drawn to stocks like D.R. Horton Inc., Lennar Corporation, PulteGroup Inc., and Toll Brothers Inc.
Clearly, last week’s reversal in yields was a welcomed surprise for many investors, and those who followed the smart money reaped the benefits. Technology and homebuilder stocks in particular proved to be attractive opportunities in light of the improved macroeconomic backdrop and rising yields. As the months to come promise continued uncertainty due to the ongoing pandemic, following the smart money looks to be the wisest course of action until the market becomes more certain once again.