Here’s my video presentation for Monday, March 8. My article below provides greater details.

Stocks and rising interest rates don’t play well together. We saw that last week, as fears about inflation pushed bond yields higher and weighed on equities.

The rally slowed last week, with stocks closing mostly higher but the NASDAQ Composite swooning as tech stocks took it on the chin. The tech sector has enjoyed a torrid run and it was due for a breather. What’s more, during periods of rising interest rates, growth stocks are negatively impacted far more than value stocks, when valuing stocks according to the discounted cash flow method.

Last week, OPEC+ made a surprise decision to extend production cuts, a move that’s bullish for crude. Saudi Arabia, the de facto cartel leader, has shown a remarkable ability lately to impose discipline on fellow oil producers.

Oil prices continued their rebound to finish the week above $66 per barrel, a clear sign of investor optimism about economic growth as well as expectations that global oil supply-and-demand will get closer to equilibrium. Despite a volatile week, the major stock indices year-to-date remain in positive territory (see table).

It begs the question: has the stock market reached a peak? I don’t think so. The economic recovery is accelerating, the job market is on the mend, the Federal Reserve won’t tighten anytime soon, and over the weekend massive fiscal stimulus finally passed Congress.

President Biden is expected to sign the $1.9 trillion coronavirus relief package sometime this week. Also keep in mind, interest rates remain historically low. At 1.6%, 10-year interest rates are approximately half the 3.1% average of the last 20 years.

The notable change is in market leadership, as the rotation from growth to value continues. I’ll get to that in a minute.

The labor market improves…

After reaching in April 2020 the highest level of unemployment the country has witnessed since the Great Depression, the jobless rate has steadily declined.

In the first employment report under the fledgling Biden administration, job growth soared in February as U.S. economic activity accelerated with coronavirus cases dropping and vaccine roll-outs fueling hope for the further easing of restrictions.

The Labor Department reported Friday that non-farm payrolls surged by 379,000 in February and the unemployment rate fell to 6.2%, beating consensus expectations for 210,000 new jobs and an unemployment rate of 6.3% (see chart).

Joblessness is falling but the pandemic has worsened inequalities in the workforce, as the gap between skilled and lower-skilled labor gets wider. Women and people of color are experiencing higher rates of unemployment than white men; unskilled jobs that require less education are getting pummeled worse than ever.

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Nearly all the job gains in February stemmed from the beleaguered hospitality and leisure sector, which enjoyed an increase of 355,000 jobs amid a lifting of dining restrictions in several states.

The latest employment numbers are encouraging but there’s still a ways to go before we return to pre-pandemic levels. As of the February 2021 data, the U.S. has 9.5 million fewer jobs than the same time a year ago. The unemployment rate is 2.7 percentage points higher than it was before the coronavirus outbreak (see chart).

In remarks Thursday, Federal Reserve Chief Jerome Powell expressed hope that jobs lost during the pandemic would be restored, but he noted that the decline in the workforce participation rate is worrisome.

As I alluded to above, we’re seeing a change of leadership in the stock market, whereby the laggards are becoming the leaders and vice versa. Overvalued technology stocks that were pegged with unrealistic valuations at the peak of the pandemic because of enthusiasm about the “work-at-home” culture have fallen recently.

At the same time, energy, financial and other cyclical stocks that had taken a beating have become leaders of the pack as the economy slowly returns to normalcy. Bond yields have been rising, a dynamic that tends to favor companies whose businesses and stock prices follow the business cycle.

Stocks of utilities (a non-cyclical sector) have gotten clobbered lately. When interest rates rise, rate-sensitive investments such as utility stocks favored by yield-hungry investors typically fall. That’s chiefly because utilities need money for capital expenditures. As rates rise, their cost of capital increases and it weighs on their share prices. Moreover, safer interest-rate pegged investments such as U.S. Treasuries become more attractive from a risk-reward standpoint.

Portfolio insurance…

I remain bullish about stocks overall, but it’s time to take out some portfolio insurance. About 5%-10% of your portfolio should be in precious metals, notably gold.

The “yellow metal” is a time-proven safe haven. Under the conditions that I’ve just described, gold also offers tremendous growth opportunities this year. I prefer the stocks of gold miners, because they can wield corporate operating leverage for exponential gains.

Our investment team has found an obscure, small-cap gold miner that’s poised to blast off. The time to invest in this gold mining play is now, before the rest of the investment herd catches on and bids up its share price. Click here for details.

John Persinos is the editorial director of Investing Daily. You can reach John at: mailbag@investingdaily.com. To subscribe to his video channel, follow this link.