In The Lonely Bull

Is it too late, no, but it is to buy across the board bargains. Investors must now seek out good buys in the more cyclical businesses. In doing so, they bet that the economic recovery will be strong enough to boost these firms’ results. The companies that are clear winners in the new post Covid-19 world are now very expensive. Everyone knows these and the smart money bought long ago and may now be reducing exposure; so, do not chase these!

The rotation from past leaders to investment laggards is a good sign. Markets that broaden out as they move higher are much healthier. Because most of the popular indices such as the S&P 500 and NASDAQ 100 are market weighted and dominated by a narrow and select group of growth  stocks, they may not accurately reflect the continuing improvement and recovery in the broader market. The best way to observe this is to track the S&P 500 unweighted index (RSP). Compare this index to the regular weighted one (SPY).

For the last few weeks, the unweighted, broader index, has outperformed the narrower focused one; we shall see if this continues. This is a particularly tricky time. However, seeing broader participation is encouraging. Time smooths out a lot of gyrations, but opportunity moves around. It is now different than what it was in March. Pull backs are inevitable and just a part of the investing process. However, there is a lot to be encouraged about. Be smart and stay steady, my friends.

The Lonely Bull

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