Trending
Land of Confusion: The ROAR Score stays at 10 this week. My 2-ETF portfolio stands at 10% SPY, 90% BIL.
For those who are in my age peer group (I’ll be 60 later this month), that title describes a mostly trendless market for stocks and bonds, while paying homage to a great 1980s song from the band Genesis, led by the supreme Phil Collins. Little known fact about Mr. Collins, which we discovered on a trip to the Alamo in San Antonio, Texas, earlier this year: he is perhaps the world’s foremost collector of artifacts from that piece of American history, and it is displayed there. Pretty cool.
The markets are also pretty cool…as in not hot as they were for a spell earlier this year. The past 2 months are why I always try to teach and remind investors that “past performance” over fixed time periods can be a great way to fool yourself into bad decisions with hard-earned wealth. Case in point. I sense that for many, the S&P 500 “feels” great, yet its return the past 2 months (3/21/24-today) is just over 1%. That’s not far from what T-Bills have delivered over that time.
This is neither a bullish nor bearish view. Simply a reminder that the biggest yoke around the neck of the equity market right now is the lack of what I call “throughput.” That is, up moves that are sustained. I help subscribers visualize some examples in the premium section.
Here’s a chart I found interesting, especially since I follow and am willing to own XLG (the 50 largest S&P 500 stocks) in my portfolios as a “position” while QQQ is something I restrict to trading, either through very short-term positions, leveraged positions using 2x or 3x ETFs (which I think are great tools in experienced hands), and options. I also think QQQ is a great income-generator. But that’s another story for another day.
This chart compares that top 50 XLG to the QQQ, which in theory should look differently, and before a few years ago, they did, more so than they do now.
I think that has a lot to do with the consolidation of the US stock market into 2 camps:
- The very biggest stocks
- The others
That second group has spent the past 3 years going nowhere, as a winner and a loser pair off and net to nothing, essentially, while the big get bigger. That’s a broad assessment, but it is something that I see pretty clearly in my research. And until that pattern breaks, this is a thin market that needs more participation. It is happening, but more in fleeting time frames, not enduring moves that last quarters or years.
This makes the financial media (of which I’m a proud member) happy, since we always have something new to write about. But for long-term investing to make a real comeback, we need more than a fraction of a fraction of the stock market to deliver beyond a trader’s time frame.
Related: A Key Chart I’m Watching This Week