When money is coming out of one sector and going into another one, we call that sector rotation. It’s a classic characteristic of a bull market, or for that matter, a market where we are generally being rewarded for owning stocks, not for selling them.
Let’s go back to February. At that point, we were seeing laggards dragging the market lower. Things like Financials and Materials were making new relative lows and had already begun their declines. In fact, both of these sectors peaked in December, months before the overall market peaked. That’s part of why we got so bearish.
So anyone who tells you that this year’s crash “came out of nowhere”, is really just fooling themselves. This year’s stock market crash came after more warning signs than any crash in U.S. history. I’ve said it before and I’ll stand by that.