November 23, 2023
By Peter Bower
Market trends on Wall Street have a long history of trending toward averages. If the market or a sector veer too much, one way or the other, then it has historically been a good predictor that it will trend back to the average trend line. This past year saw a very small segment of the U.S. stock market account for almost all the returns.
The Bull and his partners have recently noticed that the rest of the stock market has come alive. We may see this past year’s leadership stocks languish while the rest play catch-up. The fundamental factor that may have triggered this change is the growing acceptance of the notion that the Federal Reserve’s tightening cycle is finished, and that the U.S. economy is still doing fine. Inflation is clearly decelerating, leading to hope that the Fed may be able to lower short-term rates by the middle of next year. Lower rates next year may forestall any precipitous economic slowing.
A good economy is what the average stock needs to do well. This scenario is exactly what is needed. So, in this case, there will be no need to hide in a few of the biggest growth names. The rest of the market is still cheap so expect them to revert to the mean and play catch-up. Stay steady my friends.
The Lonely Bull
