Deutsche Bank says there is still room for tech stock rotation; since the end of July, large-cap growth stocks have risen 14%.

Deutsche Bank strategist Parag Thatte stated that the rotation into technology stocks that began at the end of July still has room to run. Since the end of July, large-cap growth and technology stocks have risen by 14%, reaching record highs, while the rest of the S&P 500 declined by 3% during the same period. The relative performance of large-cap growth and technology stocks "has risen to the upper half of its long-term trend channel, but has not yet reached the top." In addition, the positioning of large-cap growth and technology stocks is now about 0.8 standard deviations above the neutral level, indicating a significant overweight, but still well below previous peaks, such as the 99th percentile seen in early June. In individual stock options, trading volumes for large-cap growth and technology stocks have increased sharply, followed by consumer cyclicals, industrial cyclicals, and defensive sectors. Trading volumes for energy stocks have fallen, while materials and financial sectors are generally flat. This rotation is now in a relatively deep stage, but there is still some room to run. The bank also said it continues to believe that for the stock market, it is the volatility of interest rates, rather than the absolute level of rates, that is key.