Market Rotation Accelerates: Investors Dump Tech Stocks for Value Plays
High-flying tech names get the cold shoulder as old-school value stocks stage a comeback.
The Great Rotation Unleashed
Portfolios everywhere are getting a brutal reshuffle. Money floods out of speculative tech darlings and pours into steady-eddy value names. The shift hits like a tidal wave—no gradual transition, just wholesale repositioning.
What's Driving the Exodus
Valuation concerns trigger the mass migration. Investors finally wake up to stretched tech multiples and chase more reasonable price tags elsewhere. The momentum trade reverses so hard it gives everyone whiplash.
Survival of the Fattest Margins
Forget disruptive innovation—cash flow and dividends become the new market darlings. Companies with actual profits and reasonable P/E ratios suddenly look revolutionary. Who knew boring could be so exciting?
Another quarter, another herd mentality shift—because why make independent investment decisions when you can follow the crowd off the latest cliff?
Lessons from 2023 bank failures highlight risks of relaxing leverage ratios
Bank lobbyists in Britain and the United States have called on regulators this year to exclude sovereign debt from leverage ratio calculations, which dictate how much capital banks must hold for each dollar of assets. In the UK, it would release around £5 billion of equity capital currently trapped in gilt portfolios at a minimum leverage ratio of 3.25%.
Woods, a BoE deputy governor who is set to step down in 2026, noted that the failure of three mid-sized US banks over two years ago — including Silicon Valley Bank — indicated “bonds issued by sound governments, if liquidated in size, can carry major consequences to banks’ balance sheets due to interest rate risk”.
SVB’s 2023 collapse, which also affected its UK subsidiary, followed losses on its large US government bond holdings after interest rates ROSE sharply, sparking a depositor run. Woods added that lifting capital requirements on government debt could “allow a very large increase in bank leverage given the size of banks’ sovereign holdings” and would “largely remove sovereign risk from the bank capital framework” unless banks actively sell the bonds.
UK Finance, the main lobbying group for British banks, has previously proposed exempting gilts from leverage ratio calculations as part of its “plan for growth” regulatory reforms.
Meanwhile, in June, the US Federal Reserve proposed lowering the leverage ratio for the country’s biggest banks from at least 5% to between 3.5% and 4.25%, aligning more closely with international standards. The Fed did not include a government debt exemption in the proposal. Still, it sought feedback on it as a potential “additional modification,” amid lobbying arguments that it could improve liquidity in US Treasury markets.
Financial sector urged to strengthen cybersecurity and risk resilience
Speaking at the Mansion House gathering, Nikhil Rathi, CEO of the Financial Conduct Authority, stated that there is growing recognition in the UK of the need to manage cyber risks. He cited the £1.9 billion cyberattack on Jaguar Land Rover this year as an illustration of the threats faced by UK businesses. He said that too often, finance had been seen as independent of national security, with insufficient investment in long-term resilience.
Rathi also noted that most catastrophe- and cyber-risks in the world remain uninsured, leaving companies, credit ratings, risk premia rates, prices, and ultimately households to bear the burden.
Calling on banks and insurers to “step up”, Rathi added: “Let’s all harness the City’s expertise to address the insurance challenges. We will keep shining a light on both the risks and opportunities.”
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