Low-quality stocks are offering big upside, and the rotation has staying power, CFRA says

The U.S. Capitol building in Washington, D.C.
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Confident that Congress finally may be nearing a coronavirus stimulus deal, investors are moving down the quality spectrum in a trade that CFRA analyst Sam Stovall says can last.

Washington lawmakers appear close to a spending package that looks to be around $900 billion. That's smaller than some of the proposals that had been on the table earlier, but enough at least to provide some aid to displaced workers, ailing businesses, and cash-strapped state and local governments.

"The market continues to keep its fingers crossed for a stimulus package, no matter what the size," Stovall, the firm's chief investment strategist, said in a note. "In addition, investors just want to know if President-elect Biden can 'reach across the aisle' and sway the Republicans into agreeing to some sort of fiscal stimulus."

That has important investment implications, he added, for a move that "is not only underway but also has staying power."