Rotation and Reopening

Team Hewins
4 min readApr 1, 2021


The rotation continues

The first quarter of 2021 saw more of the so-called “rotation” into small and value stocks that started last November with the announcement of the first vaccine. We now have roughly 30% of the country, and more than 60% of people over 65, having had at least the first vaccine[i].

From a market perspective, the end is in sight, even though we are not out of the woods yet and need to continue following good practices and staying safe. The “pandemic trade” was buying the big tech stocks that did so well during the lockdowns. The “reopening trade” is buying all the downtrodden stocks that are coming to life as the economy reopens.

Portfolios that maintain discipline and rebalance to maintain exposure to all parts of the equity market benefit from whatever is doing well. And portfolios that follow our philosophy of adding extra exposure (tilting) towards small cap and value tend to benefit more from this rotation, even as they might have lagged during the big tech rally.

Despite the lingering worries, the markets see an essentially full reopening in a few months, certainly by fall. Large companies are already reopening offices, even in NYC and the Bay Area. We are now ramping up the pace of vaccinations, doing close to 3 million per day as of late March and accelerating[ii]. It is happening fast.

So, how are you feeling?

This has certainly been an ordeal. It has also wrought big changes that are only beginning to unfold. As we work through the transition to what will become our “new normal,” it will probably be helpful to make allowances for ourselves and the people around us to get over the stress and even trauma we have experienced in the past 12 months.

We are cursed to live in interesting times.

The numbers — as value and small cap continue to outperform

Source: Morningstar®, data as of March 31, 2021.

Note that the best performing asset class for the quarter is small cap value, which benefits from being small cap and being value, needless to say, and the DFA small cap value fund, which is both smaller and deeper value than the benchmark, did substantially better.

In a reversal of the trend last year (at least until November), the DFA small cap value fund rose almost 27%, a huge quarter, while the tech heavy NASDAQ index was up a modest 3%. In similar fashion, the DFA International Value fund rose nearly 12%, while the broad EAFE index was up less than 4% and EAFE Value just below 8%.

Meanwhile, bonds have declined a bit as the 10-year Treasury yield has risen above 1.70%[iii], although muni bonds declined less than taxable bonds. In any case, the magnitude of the moves is small compared to what happened in the equity markets, as expected.

Source: Morningstar®, data as of March 31, 2021.

We hope you are keeping your spirits up, and I think it is safe to say we are all looking forward to seeing each other in person again soon! Meanwhile, stay safe as we come down the home stretch. See you soon.


Roger Hewins


[i] “US COVID-19 Vaccine Progress”. Usafacts.Org, 2021, Accessed 31 Mar 2021.

[ii] Rattner, Nate. CNBC, 2021, Accessed 31 Mar 2021.

[iii] Bala, Sumathi. CNBC, 2021, Accessed 31 Mar 2021.

Team Hewins, LLC (“Team Hewins”) is an SEC-registered investment adviser; however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. The information contained within this letter is for informational purposes only and should not be considered investment advice or a recommendation to buy or sell any types of securities. Past performance is not a guarantee of future returns. It should not be assumed that diversification protects a portfolio from loss or that the diversification in a portfolio will produce profitable results. The opinions stated herein are as of the date of this letter and are subject to change. The information contained within this letter is compiled from sources Team Hewins believes to be reliable, but we cannot guarantee accuracy. We provide this information with the understanding that we are not engaged in rendering legal, accounting, or tax services. We recommend that all investors seek out the services of competent professionals in any of the aforementioned areas.



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