The money flow model just recently gave an important buy signal. This algorithm works best when the stock market broadens and becomes more value oriented than merely growth focused. Everyone knows how narrow stock market performance has been for months now. A market that has many more companies participating on the upside is far healthier and predicts a general rebound for the economy. This indicator predicts the long-awaited rotation to value stocks.
Rotation from one investment style to another is a normal feature of market action. Historically the duration of such a switch is measured in years. Many investors have been anticipating such a move but have been worn out by the length of time it has taken. There have also been many false starts. The shift almost happened at the beginning of this year when the economy indicated that its growth rate was accelerating. Then came the corona virus and the economic crisis it engendered. This gave another lease on life for growth companies that are not as business cycle sensitive.
The Bull and his partners have kept a foot in both camps. It is now time to begin shifting more assets to firms that benefit from an improving business atmosphere. Growth stocks may not be dead, but leadership may shift elsewhere. Since there have been many false moves over the past few years, we are moving cautiously and incrementally. The good news is that the near future is looking more and more positive. Stay steady, my friends.
The Lonely Bull