Another rise in Treasury yields on Tuesday helped to create a divide in the stock market, with high-growth tech stocks sliding while bank and energy names moved higher.
That split makes this week something like a microcosm of 2021 as a whole, which has seen energy outperform while some of the top stocks during the pandemic, such as Zoom Video, have deflated. Cathie Wood's Ark Innovation ETF, which holds many stocks in the high-growth bucket, fell more than 2% on Tuesday.
Rising rates are seen as bad news for high-growth stocks, as they make future earnings less appealing, but the size of the recent moves means that some of these declines may be reaching their endpoint, said Stephanie Link, chief investment strategist and portfolio manager at Hightower Advisors.
"You don't really want to have long-dated assets. You don't really want to have high-multiple growth stocks in that kind of environment. All this being said, some of these high-growth stocks are down 50, 60, 70%. I'm not involved in any of them, that's not my style, but at some point they're going to get interesting," Link said.
