Hopes that vaccination could end the coronavirus pandemic are driving two parallel rotations in the U.S. stock market. 

First, the prospect of a return to economic normalcy is lifting stocks in sectors that were "Covid losers" at the expense of "Covid winners" that thrived during the pandemic. As a result, oil and gas, retail REITs, airlines, hotels and resorts, and the like are now outperforming tech hardware, online retailers, and gold.

Second, expectations of higher rates as growth prospects are boosted by the rollout of the vaccine and sustained monetary and fiscal stimulus are lifting "value" stocks that are cheap relative to current earnings and can therefore be considered short-lived. Meanwhile, "growth" stocks that are expensive relative to current earnings and therefore long-term are struggling in relative terms. In this environment, the financial sector may provide a hedge against a sharp rise in long-term rates, and the commodities sector against rising inflation expectations.

Relative valuations between value and growth stocks remain close to 20-year lows. 

                     Relative valuation Value/Growth

    Relative performance Value/Growth vs. Interest rates