"Will we enter into a bear market?"
That's not what a bull market looks like.
And granted, some types of stocks (ahem growth) got crushed, while other stocks held up much better.
We call that relative strength and is typical during regime changes in the bond market.
The new 52-week high list peaked in early February of 2021, over a year ago. So did the Advance-Decline line. So did Biotechnology, Chinese Internet, the IPO Index, SPACs and all things Cathie Wood.
Wealth destruction is what we call the past year in most stocks.
Well-deserved destruction, and an unwind in unearned enthusiasm, for certain sectors that tend to underperform in rising rate environments.
And guess what? Interest Rates have been rising, not sure if you heard....
So isn't all this perfectly normal?
What's the problem?
I would encourage you to take a look at what's happening around the world. Many of these countries are having historic starts to the year. Brazil came into today up almost 17% just this year alone, leading the way higher for Latin America.
But you're also seeing strength across other areas that have had a hard time in recent years:
This is called rotation.
American investors with too much growth exposure are struggling once again this year, with the Nasdaq already down another 10% in 2022 and the S&P500 down over 6%.
The United States is the worst performing country in the Western Hemisphere this year.
How does that make you feel?
Smells like rotation is here.
For my money, it's here to stay as long as interest rates around the world keep rising.
And what's really interesting is that the sell side, in their infinite wisdom, is NOT buying into this trend of higher interest rates.
Consensus among the Sell Side is 2-2.50% for 10yr yields in 2022, with almost no forecasts pricing in 3%.
Guess what?
I think we definitely see 3%.
So which stocks are going to do well while we're on our way to that 3%?
I believe it's the ones we've been buying.
How do you feel about that?
Do you agree?
Disagree?
Are you one of these people who think this is just a mirage and growth stocks will be leaders again very soon?
Other than some mean reversion, and counter-trend rallies for short-term trading, I think those stocks are still for people who enjoy losing money.
I'm not one of those people.
JC