Corrections are a Choice

JC Parets
August 14, 2023

The Nasdaq100 is already down 4.5% this month. Technology as a sector is down almost 6.5% for August.

But corrections are a choice, not a requirement.

As an investor, you make the choice and decide which assets you want to own and which you do not.

Remember, "Passive Investing" is a lie. There's no such thing. All investors are active. The difference is whether you choose your portfolio holdings, or you let some random index providers make those decisions for you.

But we're all active investors, whether we like it or not. Don't forget that.

So even thought the indexes are messy this quarter, take a look at Energy hitting new 6-month highs this week:

Sector rotation is the lifeblood of a bull market. But if you choose to invest in an index with little exposure to the best sectors, and too much exposure to the worst ones, then you're not going to be happy with the results.

Think about it like this: When you go down the list of all the things you can invest in, is Technology the one you would choose right now?

Is this the group you want to buy?

See: This is Overhead Supply

If you own the S&P500, then a huge % of your portfolio is going to be this sector here above. If you own the Nasdaq100, then it's even more obnoxious, with over half your portfolio in this sector above.

And as well as Tech did during the first half of the year, I continue to believe that it's going to be much different in the back half.

Look at Energy making new 3-month highs relative to Large-cap Growth in general:

Also see: Regime Change

Energy represents a tiny weighting in the major indexes.

So Energy can continue to be the leader in the back half of the year, and it won't make a dent in the major indexes.

Energy on an Equally-weighted basis is up 14% so far this quarter.

Take a look at Hess Corporation with its highest weekly closing price in its entire history:

Once you get past a certain income and net worth, recessions become a choice. Corrections are voluntary.

If you're reading this note, it's likely because you've got some money in the market.

If you're broke, then why would you care what I have to say?

We're here to make more money with our money. That's literally our job as investors.

So if you've got a few bucks, then it's up to you.

Do you choose correction? Or do you choose to be proactive?

These are the questions I like to ask and things I'm thinking about right now.

What about you?

What's on your mind this week?

JC

 

 

 

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