Is the Re-Opening/Value Trade Over?

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Interest rates have been falling in recent months leading some to speculate that the “re-opening” trade has run its course. This in turn begs the question as to whether the “value” trade is over. On both accounts, we see signals that still point to an extension of the re-opening/value trade.

Let’s start with the re-opening aspect. Two easy variables to consider are TSA checkpoint throughput and OpenTable seated diners. In the first chart, I overlay TSA checkpoint throughput on US 10-Year Treasury yields. Daily throughput is up about 500,000 people/day since yields peaked.

Next, we consider OpenTable seated diners relative to 2019. On a 30-day moving average, seated diners in the US are only off 7.5% from 2019, while they were down 40% when yields peaked. It is hard to see any relationship between the move lower in rates and reduced re-opening related activity. In fact, quite the contrary: re-opening appears to be continuing the strong pace we’ve been seeing all year.

How about earnings estimates for value and growth stocks? In the next chart, I show the ratio of earnings estimates and price of the S&P 500 Value Index relative to the S&P 500 Growth Index.

While value has underperformed growth recently, earnings estimates continue rising at a faster pace for the S&P 500 Value index relative to the S&P 500 Growth index.

In the end, we don’t see the high frequency data that would signal a durable rotation from value to growth. In our view, this looks more like a buy-the-dip opportunity in value for the next leg of re-opening and earnings momentum.