Late last year and earlier in 2021 I began to shift my portfolio away from stay-at-home beneficiaries to companies that would benefit from reopening. The stocks I reduced or sold completely were generally the right ones; the ones I bought, however, didn’t do me much good.

I’ve noticed in the past few days that this latter group has begun to perk up. I think this change is for real. How so?

–for one thing, although anti-vaccine propaganda will likely continue, and the human toll from political posturing will likely continue to be high, it’s probably not going to get any worse (as a human being, I hope; as an investor, I’m betting)–the Fed now thinks the economy is strong enough that it can begin to lessen the downward pressure it has been putting on the long end of the bond market and that short rates will begin to rise art a somewhat faster clip than it imagined a few months ago

–temporary Federal stimulus aimed at offsetting some of the pandemic’s economic damage to incomes, has already begun to shrink. Absent action from Congress, it will continue to do so. As/when this tightening of policy begins to affect financial markets, rates may begin to rise–and because of this, PE ratios will start to contract a bit. That’s a bad thing for financial markets. At the same time, however, equity investor interest will begin to rotate away from “story” stocks, where profits are an aspirational goal, toward more conceptually mundane economic-cycle-sensitive ones. That’s because the latter group will begin to show rising sales and earnings–some of them will doubtless be surprisingly good (I’m tempted to write “shockingly,” because that’s the way I think things will play out, but I think that’s too emotion-laden).

In any event, this shift is how I read recent price action.