@realmoney

May 26, 2020 | 05:29 PM EDT DOUG KASS
I'm Pivoting Sharply From Growth to Value
* Banks +8% as growth is in the red on the day
* Given the overweighting in portfolios, exchange-traded funds and jndexes of Microsoft (MSFT) and FAANG stocks -- a relatively small

disintermediation could fuel banks and other value names.
* Sell in May and go away?
* Did I mention more hostility with China?
The pivot from growth (particularly in "shelter in home" kind of equities, like Shopify ($SHOP) (-$57)) to value was conspicuous in today's trading)

session.
My substantially over weighted (some might say recklessly so) bank holdings were up by about +8% today (Goldman Sachs (GS) a market leader, +$16) -- against QQQs (QQQ) , which closed in the red and were a full -$4 from my opening short sale.
But, as pointed out by

my pal (and golf enemy on the North Team) Dave, the recent underperformance of banks has been meaningful:
"Some perspective is in order here. Since late February, BKX has underperformed SPY (SPY) by 2,300 basis points. Even with today's large price jump it is

still below levels reached April 29 and April 9. You want to trade bank stocks, you can catch some big daily moves, but as an "investment," they have badly lagged other sectors and for my money the results of Europe and Japan's experiment with 0% interest rates do not give me

any burning desire to overweight financials as an "investment.""
Unlike some, I don't have the special sauce -- that helps to explain why I always am uncertain and "average in."
We will not know whether this is a cyclical or secular inflection point -- only time will tell.

There is a great deal of skepticism that the "old economy" stocks can begin a period of relative outperformance over "new economy" as a lynx-eyed Rev Shark expressed in his thoughtful market comments.
But to this observer, the substantial consensus overweighting when coupled

with the implicit optimism, expressed by many, if not the majority, could be a classic example of first level thinking. That is, we all understand and appreciate the tailwinds to Amazon's (AMZN) , Facebook's (FB) , Netflix's (NFLX) and Alphabet's (GOOGL) forward growth - but is

it already discounted in share prices (second level thinking)?
Finally, I would add that Mr. Market often does what is least expected and could hurt the most investors -- and an inflection from growth to value is such a ticket as, given that financials were at a record low

7.4% of the S&P Index. Stated simply, most investors are not positioned for such a development.
Sell In May and Go Away?
Given the remarkable rally and sizeable Index weighting of FAANG and MSFT (and also health care and biotech) -- that the recent leaders may be a potential

source of funds that fuels value. And, in light of the overweightings of growth in portfolios, it wouldn't take too much selling of these growth-spiked "ATMs" to produce a few more days in banks stocks like today -- reversing what Dave observed earlier.
I use the term "may be,"

as we will only know with the benefit of hindsight. (Qualifiers and not confidence are my credos).
I am positioned for the pivot -- short the indexes and long value.
If the pivot and change of leadership does evolve -- it could, or at least, historically, it has, led to a

lower overall market.
Did I mention, the increased hostilities between the U.S. and China -- which got very little press?
***
In other news, gold got clobbered (I recently eliminated my GLD (GLD) (-$2.20)) and bonds got hit (TLT (TLT) - $2.30).

Breadth, which was better than 10-to-one positive, ended the day only 5.5-1. @jimcramer @tomkeene @cnbcfastmoney @riskreversal @terranovajoe @guyadami @carlquintanilla @michaelsantoli @lizclaman @business @ferrotv @saraeisen @threadreaderapp unroll