Growth stocks outpaced value in the past week, a return to what has led the market higher in the decade-long expansion.
Todd Gordon, managing director of Ascent Wealth Partners, sees the trend continuing.
"Even pre-Covid, we were seeing leadership in tech and not just large-cap tech but what we'll call second-tier tech — financials and energy have been lagging in terms of a sector rotation point of view for some time. So, if you were represented in those sectors, you were underperforming the indexes, because technology was leading heading into Covid," Gordon said Friday on CNBC's "Trading Nation."
He names Shopify, Twilio and Trade Desk as three second-tier tech stocks that have also rallied. Growth investors favor stocks that have a high premium placed on potential future earnings — those stocks include Apple and Facebook. Value stocks, on the other hand, have a cheaper valuation, such as Discovery and CVS Health.
"The rebound trade has been quite ferocious, and again what led before is leading again, which is technology," said Gordon. "If you look at the ratio of IVW, which is your growth iShares, into IVE, which is value, the chasm that has formed here just in this rebound relative to the S&P— I've overlaid in the S&P — is huge."
The IVW growth ETF is down 1% for the year, while the IVE value ETF has tumbled 19%.
"We own just a position in the QQQs — you know, get exposure to large-cap tech and if you want to trade IVW, the QQQs is a simple way to do it. We have a little bit of gap that we still need to fill up around $230 in the QQQs. If we can get through there, I don't see why we wouldn't go to new highs," said Gordon.
The QQQ ETF tracks the Nasdaq 100, an index made up of mostly high-growth stocks such as Microsoft and Apple.
John Petrides, portfolio manager at Tocqueville Asset Management, says tech has the tailwinds to continue to move higher.
"It's hard to argue … where in an environment where everyday investors are questioning liquidity … tech companies have more cash than debt on a balance sheet," Petrides said during the same segment. "Post-Covid-19, the work-at-home environment is going to last the whole time. So, there's a lot of tech companies that cater towards that. And, you know, that's going to get more momentum. So, it's hard right now to see what derails tech and growth."