While there have been some real winners during the recent rally, the run off the lows from this fall has also left many stocks behind.
Value stocks, cyclicals, and blue-chip names have prospered for the past two months, as groups like financials and industrials have been the latest beneficiaries of sector rotation.
At the same time, mega-cap technology and the most-speculative growth areas of the market have continued to show relative weakness.
To be clear, it’s not like these stocks have been crashing lower while the rest of the market rallies. Of course, many have participated in the upside action.
But, on balance, the performance from growth stocks has been lackluster.
The disparity between the growth-heavy Nasdaq 100 and the value-heavy Dow Jones Industrial Average perfectly illustrates what’s taken place:
The 2020 V-shaped recovery has warped investors’ brains.
But this is nothing more than recency bias. In reality, bottoms are a process, not an event.
Don’t fall victim to what’s easy or comfortable. Instead, let’s focus on the facts.
Markets continue to send mixed signals, testing the resolve of even the most disciplined investor. Rather than fight the trend or trendless nature of the markets, I prefer to identify evidence that supports the next directional move.
And there’s one insightful chart atop my deck regarding the direction of the US dollar.
The trend for the S&P 500 has now fallen for 34 weeks in a row. That is the longest sustained decline in the trend since the Financial Crisis ended over a decade ago.
Portfolio Update: As mentioned in yesterday's Market Notes, our tactical models are arguing for patience rather than aggressiveness with respect to equity exposure. That being said we want to stay in harmony with relative opportunities as they emerge. While not putting new money to work, we have tweaked the holdings in our Dynamic Tactical Opportunity Portfolio.
We like to keep things simple and remove unnecessary complexity.
As far as we've been concerned, over the last few years -- and particularly since the November high -- Bitcoin has merely followed legacy markets.
For the longest time, it's been all about correlations. Has this made our job slightly boring? Sure, there's no doubt.
As technicians, we love having multiple uncorrelated asset classes at our fingertips. The more assets with their own idiosyncratic drivers away from systemic risk factors, the better.
But we need to see the market for what it is and profit from what ultimately pays, and that's price.
