This post-election market rotation is the ‘biggest, most significant’ we’ve ever seen, strategist says
The market rotation that followed Donald Trump's win on Nov. 8 was unprecedented in its breadth and importance for investors, strategist Steven Wieting told CNBC on Tuesday.
"What we've seen — a rotation between financials [and] industrials versus utilities and staples — has been about the biggest, most significant rotation we've ever seen," Citi Private Bank's global chief investment strategist said on "Squawk Box."
Wieting said the rotation was in response to Trump's pro-growth plans, the effects of which will be seen around the world as the dollar strengthens, interest rates presumably rise and prospective borrowing for tax cuts and spending programs begins.
The strategist called it "an adjustment around world where savings is going to have to flow."
He said fellow strategists and investors will simply "have to react to what he does," especially considering the fact that any legislation on tax cuts or spending will not pass before mid-2017.
Also on "Squawk Box," QMA Managing Director Ed Keon said that after considering Trump's pro-growth agenda on election night, he "ended up buying stocks and selling bonds" the next day.
Keon was especially positive about the president-elect's infrastructure plan. "It'll be both something on the spending side, probably some public-private partnerships, along with the tax cuts, that will be … at least for the next couple years, very pro-growth," he said.
As the multidecade bond rally slows, interest rates will start to trend higher, according to Keon. But some economic obstacles will stand in the way of rates rising as much as some investors would like, the analyst said.
"If we can get the labor force to recover, if we can get better productivity growth than where we are now, then there's more room for rates to rise," he said.
However, several factors could pose a threat to the ideal pro-growth vision investors are eagerly awaiting, JPMorgan Asset Management's Oksana Aronov told "Squawk Box."
"Some of the things that could potentially derail this growth prospect that we are all hoping for is that rates do get too high, and you have rising tariffs also creating some headwinds for demand," said Aronov, a fixed income strategist.
Dollar appreciation could also hinder demand and the rise of interest rates, but if appreciation remains around 5 percent per year, it should not pose a threat to either, Aronov said, citing the dollar's 20 percent appreciation in 2015 that caused the Federal Reserve to back off raising rates.
As a result of the market shift and the widespread transfer of capital out of bonds, Aronov said her firm is using a new approach with its clients.
"We … have been talking to clients a lot about switching into strategies that are a lot less correlated to traditional drivers of return within bond strategies, so a more long-short approach as opposed to a long-only approach," Aronov said, referring to taking new, shorter-term investment positions in bonds that are expected to depreciate over time.
"It's going to be very difficult to continue making money in fixed income the way we have in the past 35 years," Aronov added.
Barbara Reinhard, head of asset allocation at Voya Investment Management, is also making some major changes to the portfolios she handles.
"We've been rotating the portfolios for pretty much the entire year away from the safe havens, away from the duration bets and into credit and also into equities," the analyst said.
Reinhard said the "violent rotation" into financial and cyclical stocks coincided with the election, but was well underway before it happened, with a solid growth trajectory seen through the third and fourth quarters of 2016.
Either way, "we think the rotation into the cyclical parts of the market is here to stay," Reinhard said. "We think it's going to be very durable in nature."