Regression to the Mean
In a stock market that seems to be going nowhere, a lot can be happening.
Individual sectors come in and out of favor. Individual stocks respond to news, earnings, and views about their business. All of that is happening now. There are sectors that are stalling out after terrific positive moves and others that have been in downtrends that are now reversing. Individual companies have been reporting earnings; most good, but some not. The responses can be quite volatile.
We are seeing signs of a resurgence in the performance of retail, energy, and financial companies. These sectors, that have been in long-term downtrends, are now outperforming the market at large. Their performance is regressing toward the average for the broad market (the mean). This positive turnaround can last quite some time. We have recently raised exposure to energy and may increase it in retail. Catching these trends is important for the overall performance of portfolios.
Stay steady, my friends.
El Solo Toro