Thomas Hayes of Great Hill Capital has been bombarded lately with questions from skittish investors wanting to know if a correction is going to get in the way of a December rally.
In a word: No.
“There will be no Grinch! Santa Claus is coming to town,” he wrote in a blog post on Wednesday, pointing to the stat that when the S&P 500
is up 10% to 15% through November, December closes positive 100% of the time. The trend will remain in tact, he predicted.
Hayes said that $2.5 trillion in savings, massive pent-up demand and the beginning of vaccinations will unleash the buying in the coming weeks.
“When consumers up their spending, factories will have to increase production rapidly, because the shelves are almost empty,” he wrote. “Relative to the level of economic activity, U.S. inventories are near the leanest levels in history.”
Read: Investors may have already missed Santa
As for where to cash in on the rally, Hayes said “the rotation is real” — the move from highflying techs to value plays that have been hit hard during the pandemic — and it’s not going anywhere.
“While the (short-term) ‘easy money’ has been made in the general indices (since the March lows), I think the easy money is just getting started in ‘left for dead’ sectors/stocks,” he said. “I believe banks, defense stocks and pockets of energy will be as good –– if not orders of magnitude better (in coming quarters) –– than buying the general market in late March.”
Specifically, Wells Fargo remains his favorite pick. The stock is up about 40% from its lows in the past five weeks and he believes it’s “just the beginning.” For more from Hayes, check out his Yahoo! Finance interview from Wednesday:
Meanwhile, stocks were looking good in Thursday’s session, with the Dow Jones Industrial Average up triple digits, while both the S&P 500 index and Nasdaq Composite were moving higher, as well.