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Markets have continued to run in 2021 but the character of the rally has changed significantly, as Ritholtz wealth management director of research Michael Batnick details in Rotation. The technology stocks that led markets higher through much of 2020 are now lagging badly as smaller capitalization companies from non-tech sectors surge.

Mr. Batnick notes that while Apple Inc. has performed steadily over the past six months, the rest of the FAANG stocks have not been so lucky. Alphabet Inc. (Google’s parent company) ranks 357th in terms of S&P 500 member returns for the period, and it only gets worse from there. Facebook Inc. ranks 432nd, Microsoft Corp. 433, Netflix 450 and Amazon bringing up the rear at 455.

A similar trend was evident domestically. Canada’s most successful corporate contribution to online shopping, Shopify Inc., returned a decent 7.9 per cent in the last six months, but this ranks 154th among S&P/TSX Composite member companies.

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The best-performing domestic stock in the past six months is another technology success story – Lightspeed POS – but elsewhere the top 10 is littered with cyclical companies most sensitive to recovering economic growth. These include Whitecap Resources Inc., Seven Generations Energy, Methanex Corp., Intertape Polymer Group Inc., Linamar Corp and Hudbay Minerals Inc.

South of the border, the rotation away from mega-cap technology stocks is best viewed in comparison with the Russell 2000 Index of small cap companies. Mr. Batnick reports that the equal-weighted return of the biggest seven tech stocks returned about 7.0 per cent in the last six months, underperforming the S&P 500 by 10 per cent and the Russell 2000 by 38 per cent.

-- Scott Barlow, Globe and Mail market strategist

Also see: Value stocks surge boosts 2020′s losers as investors bet on economic revival

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

Stocks to ponder

Westport Fuel Systems Inc. (WPRT-T) This stock continues to climb amid a bullish outlook for renewable and clean energy alternatives, particularly as the climate-friendly Joe Biden administration readies to take office in the United States. Shares of the Vancouver-based company, which makes alternative fuel systems and components, were up by as much as 18 per cent to $9.37 in early trading on the Toronto Stock Exchange Wednesday, their highest level since 2014. Brenda Bouw tells us more. (for subscribers)

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The Rundown

Green cred or greenwash? Investors weigh companies’ carbon claims

For investors who embrace ESG principles (they invest in companies with high environmental, social and governance standards), it may be easy to feel cynical about the trend. It can be put down as so-called greenwashing, where companies use green initiatives as a kind of marketing strategy, obfuscating their carbon-emitting ways. But is the greenwashing label too harsh in many cases? David Berman examines the issue. (for subscribers)

There are signs that fee competition in the ETF business has stalled out

It was once possible to invest in a small, wholesome portfolio of exchange-traded funds and see your fees going down on a regular basis. But there’s evidence that years of fierce ETF fee competition has stalled. In some cases, fees have ticked a tiny bit higher. Rob Carrick reports. (for subscribers)

ETFs are healthier retirement options, so why don’t more advisers use them?

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A good adviser provides plenty of wealth management benefits. A rare few will even build you a portfolio of low-cost index funds. But when it comes to investing, most financial advisers are like dogs chasing tails – even with their own, personal money. Andrew Hallam tells us more. (for everyone)

Seven ETFs to help tame an expected rise in inflation

Record low interest rates, unprecedented government stimulus and a healing global economy could be a recipe for the return of inflation. A variety of exchange-traded funds (ETFs) can help concerned investors grapple with a general rise in the level of prices that’s coming. Joel Schlesinger takes a look at some of them. (for everyone)

Here are the stocks and ETFs you looked up the most on Globe Investor in 2020

Globe Investor users, in managing their finances through a global pandemic and volatile market swings, looked up 57 million stock quotes in 2020. Here are the most viewed stock quotes by country and sector. (for everyone)

Others (for subscribers)

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Industrial Alliance Securities unveils its top Canadian stock picks for 2021

Wednesday’s analyst upgrades and downgrades

Tuesday’s analyst upgrades and downgrades

Wednesday’s Insider Report: CEO is a buyer of this stock delivering growth and income to its shareholders

Tuesday’s Insider Report: CFO accumulates units in this fund with a stable monthly distribution

Number Cruncher: Seven TSX consumer staples stocks that have caught the eye of institutional investors

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Number Cruncher: Ten Canadian-listed engineering and construction companies

Dollar bears grow cautious as U.S. yields rise

Others (for everyone)

DoubleLine’s Gundlach bullish on Asian emerging market stocks, neutral on bitcoin

Lockdowns in 2021 threaten to slow global first-quarter earnings recovery

Research Report: Why the charts suggest this bull market has room to run

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Globe Advisor

How to prepare for a potential tax hike on capital gains

Why investors shouldn’t fear all-time highs on the stock market

Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis, and access to ProStation - a powerful tool to help you manage your clients’’ portfolios.

Ask Globe Investor

Question: I am going to contribute $6,000 to my TFSA at the start of 2021. I was planning to invest this in ETFs that have U.S. stocks but are traded on the TSX in Canadian dollars. Some of these funds have a hedged and unhedged version. If the forecasts are correct for a weaker U.S. dollar for next year, would I be better to buy the unhedged versions in these ETFs? Thanks very much. Rob M.

Answer: When a fund is “hedged”, it means the managers have made arrangements to protect the assets against the effect of currency fluctuations. This removes one element of risk. An unhedged fund is fully exposed to currency fluctuations. In terms of Canadian-U.S. dollars, that means that a Canadian investor in an unhedged ETF that invests in U.S. securities would benefit from a rise in the value of the greenback. However, if the loonie goes up against the U.S. dollar, a Canadian investor will suffer a currency loss.

Predicting currency movements, especially short-term, is extremely difficult. That’s why I prefer hedged funds in this situation. Investing carries risk at any time, so why not remove one element of that risk?

--Gordon Pape

What’s up in the days ahead

Veteran money manager Francois Bourdon will provide us with his latest stock picks. Plus, the Contra Guys will reveal their first stock selection of the year - a bank from across the pond.

Click here to see the Globe Investor earnings and economic news calendar.

More Globe Investor coverage

For more Globe Investor stories, follow us on Twitter @globeinvestor

You may also be interested in our Market Update or Carrick on Money newsletters. Explore them on our newsletter signup page.

Compiled by Globe Investor Staff

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