Bull Market – Winter Host http://winterhost.org/ Sat, 08 Jan 2022 12:33:08 +0000 en-US hourly 1 https://wordpress.org/?v=5.8 https://winterhost.org/wp-content/uploads/2021/10/icon-50x50.png Bull Market – Winter Host http://winterhost.org/ 32 32 Time is running out for this bull market https://winterhost.org/time-is-running-out-for-this-bull-market/ Sat, 08 Jan 2022 12:33:08 +0000 https://winterhost.org/time-is-running-out-for-this-bull-market/ Editor’s Note: In today’s weekend edition, we’re taking a break from our regular fare to share a trial run of Ten stock trader editor-in-chief Greg Diamond. Adapted from his Weekly Market Outlook for December 20, this article covers a possible warning sign he sees flashing in the markets. And while we believe that this bull […]]]>

Editor’s Note: In today’s weekend edition, we’re taking a break from our regular fare to share a trial run of Ten stock trader editor-in-chief Greg Diamond. Adapted from his Weekly Market Outlook for December 20, this article covers a possible warning sign he sees flashing in the markets. And while we believe that this bull market still has room, its warning deserves our attention today …


“I’m sorry about the scholarship, Greg …”

I get this often from my friends and family when stocks are low, and I always laugh.

Do they assume I’m bullish? And why must the falling stock market be a bad thing?

It is in my opinion a sign of the times.

Just about everyone pays attention to the stock market these days. Bitcoin’s market cap soared to $ 1 trillion last year … and non-fungible tokens (“NFT”) – digital versions of pictures of things – sell for millions. All of this is a sign of the euphoria we are currently seeing in the capital markets.

But it won’t last …

Most people think the big clues just keep going up from here. But they’re not looking at what’s going on under the hood of the stock market … that’s what I’m going to point out now.

What is happening today is similar to what happened in 2000. We see a lot of stocks that participated in the bull market going down, peaking, and then taking serious declines.

So what does this mean?

This means that the bull market is running out of energy … time is running out.

Growth stocks are no longer progressing

To be clear, in the short term I’m still bullish … But the long term technical picture is cause for concern for the bulls. It is because of this common theme that plays out in the prices of several growth stocks.

These actions started with a huge increase after the pandemic crash of March 2020 …

I’ll start with the DocuSign electronic agreement company (DOCU). It was a high growth company that participated in the bull market with the major indices. But it no longer does.

The stock rebounded 390% from its March 2020 low before peaking in September. It was unable to keep up with major indexes and has since crashed. The 200-day moving average (“200-DMA”), a measure of the long-term trendline, is not even in the picture anymore …

Many of the major indices are holding above their 200 DMAs, but not DocuSign. This is one of the many growth actions that are lagging behind.

Another is CrowdStrike (CRWD), which provides cybersecurity applications to businesses around the world …

This stock has seen a spectacular rise of 830% from its low in March 2020 … Talk about growth. But it peaked in early November and fell 37% to its recent lows, breaking its uptrend and 200-DMA. Looked…

And combined with the action we are currently seeing on other growth stocks, this is a source of concern.

Let’s take a look at the mobile payments company Block (SQ) – which changed its name from Square in December.

Similar to other growth stocks, Block climbed nearly 800% from its March 2020 low, but has since peaked in August. He is now well below his 200-DMA.

It also couldn’t contain the previous “support” (the blue lines), an important technical level that traders tend to buy. Going below support turns the level into “resistance”. This essentially makes it much more difficult for stocks to get past that point. Looked…

You can see the theme I’m highlighting with these actions. It’s the same story in the cloud communications company Twilio (TWLO) …

The stock was up 570% from its March 2020 low. But it peaked in February and has not tracked the overall market since. Twilio’s stock is below its 200-DMA, and the uptrend is broken …

It’s not serious Why these giants are on the ground. It only matters that they are down from other major growth and tech stocks around the world.

Capital flees. When these stocks participated in the rally to the upside, it confirmed the strength of growth stocks – formidable. But now that they’re not, it puts the bull market on thin ice.

It’s the stocks that go down. Which stocks keep the main indices at the top? For the most part, the leaders are Apple, Microsoft and Alphabet. There are others, but these are the big three.

If you line up all the big growth stocks like dominoes, you’ll see some fall … And those top three growth leaders – Alphabet, Apple, and Microsoft – are at the end of that line.

For the moment, they support the weight of the major indices … But eventually, they will succumb to this collapse of the bull market in 2022.

Good trade,

Greg Diamond, CMT

Editor’s Note: Greg thinks a huge market movement is coming in 2022 … And that could change everything for millions of Americans. If you don’t see it coming, it could spell financial ruin. If you prepare, you could potentially double your money 10 different times – without buying a single share. But there is a caveat: you will need to use a different strategy than you are probably familiar with … Click here for full details.


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“We are entering the next phase of the bull market, but expect a bumpy ride” https://winterhost.org/we-are-entering-the-next-phase-of-the-bull-market-but-expect-a-bumpy-ride/ Sat, 08 Jan 2022 12:25:59 +0000 https://winterhost.org/we-are-entering-the-next-phase-of-the-bull-market-but-expect-a-bumpy-ride/ Indian stock markets have seen bouts of volatility over the past two months as the US Federal Reserve began to reverse its easy money policy amid high inflation. Foreign institutional investors also withdrew Rs 25,000 crore in November and December from Indian stock markets. But, as we entered 2022, the BSE Sensex retested the 60,000 […]]]>

Indian stock markets have seen bouts of volatility over the past two months as the US Federal Reserve began to reverse its easy money policy amid high inflation. Foreign institutional investors also withdrew Rs 25,000 crore in November and December from Indian stock markets. But, as we entered 2022, the BSE Sensex retested the 60,000 level, although it was still more than 4% below its maximum lifespan.

In an interview with THE WEEK, Hiren Ved, CEO, Director and Chief Investment Officer of Alchemy Capital Management said that while the market may consolidate as investors digest the Fed’s decline in liquidity, the bull market is not not finished. He expects strong corporate earnings which could lead to the next stage of the market rally.

Q. The equity markets have experienced some volatility over the past two months. Where do you think the markets are heading in 2022?

Bull markets are never markets that rise in a straight line. Bull markets also have phases. Usually every time the markets rebound after a really deep correction like it happened in 2020 you have a really big rebound and then usually the nifty or narrow indices can follow some kind of sideways movement. I think we’re entering a phase where the Nifty could consolidate and spend some time here. Individual stocks and sectors could very well be in a bull market.

I think we are in a transitional phase, where the markets are essentially digesting the fact that additional liquidity will not be created by the Federal Reserve. They talked about three interest rate hikes. My personal feeling is at best that there will be one or two rate hikes. But, the Fed has clearly shown its hand now and that risk is out of the way. So I think after such a stupendous rise you usually see some sort of correction and consolidation. This does not mean that the bull market is over.

Q. As central banks have started to tighten monetary policies and there are uncertainties with the new strain of COVID19, earnings growth across all sectors has been strong. Will lower liquidity weigh on markets or will continued earnings growth cause another rally?

Our optimism in the markets is largely based on our belief in the story of earnings growth. I think earnings will rebound very strongly. They have actually bounced back in FY 21 and even through 2021-2022 profits are expected to increase by at least 25%.

I think people are worried that the markets are too high. If the pre-pandemic Nifty was 12,000 and you increase 50%, you get to 18,000. Markets reflect earnings growth. Profits are up about 50 percent, so the markets are up 45 to 50 percent.

Q. Are you looking at particular sectors here? Over the past couple of years, we have seen technology and pharmacy perform very well as a result of the pandemic. What are your thoughts now?

We have seen that technology, specialty chemicals and pharma have been the leading sectors of the rally. These are also the sectors with the best earnings growth. I think these sectors are on a secular growth path. Thus, they will continue to increase their income.

But, I think, if you were to look two years from now, there are a lot of economically focused sectors that will generate profit growth as well – capital goods, manufacturing, automobiles, cement, and metals. Sectors that are well aligned with the economy and have not done well over the past few years, as the business cycle picks up, you start to see earnings growth coming in there.

Q. What do you think of the tech space? We have had several IPOs this year, and many more are in the works.

Some of these businesses are going to make a lot of money in the future because the businesses disrupt existing businesses and grow at a much faster rate. Hence, they will create significant wealth and market capitalization. But, that said, the journey is not going to be very easy. The starting valuations of many of these companies are quite aggressive. Therefore, we are quite likely to see that over the next 12-18 months we will have the opportunity to buy some of these companies at a much better valuation.

You must choose. Many of these businesses will experience tremendous success and create wealth over the next several years. But, at the moment, because it is a new phenomenon, the markets and the investors are very enthusiastic and they want to bet on these companies whatever their valuation. We’ve seen that in the best of the best growth companies there are several twists and turns before they reach greatness.

What we do is we study all these companies, we understand these companies more closely and at the right time and in the right place, we will invest in them and not just because they are available and listed today. In some, we may have already made small investments.

Q. Do you think some of these tech companies, especially in fintech, have the ability to disrupt traditional businesses like banks?

Previously, banks had the entire value chain under their command. Now, fintechs are attacking parts of the value chain. Consequently, the markets have regularly downgraded the (banking) sector as investors are unable to assess the impact that fintechs will have on the profitability of some of these lenders. It’s an evolving story.

I am convinced that fintechs are likely to take over part of the banks’ value chain. For example, no one really cared about UPI (Unified Payment Interface) because it was not profitable. Then all of a sudden you had fintechs like Paytm and PhonePe of the world who got a lot of customers on their platform, who do payments as a service transactions.

The fintechs have these guys and they have their opinion to come to the platform and trade. Once the consumer gets so used to the service, when you have the opportunity to monetize that customer base, sell other services, or make money from transactions, it will be very interesting. If you are able to do this then these businesses can become very profitable in the future.

Banks in general have underperformed the market. I think there is a story there. The story is a combination of the fact that in the initial phase of COVID these guys had to take write-downs, provisions, raise capital and part two of the story is fintechs are on the ground.

Q. Would you continue to invest fully even if the markets are volatile?

A lesson from the 2002-2007 bull market was that if you tried to time the market, you were probably getting sub-optimal results. If your overall thesis is correct, then you’re better off going through the journey with the associated bumps, rather than predicting and navigating the bumps, and then trying to follow the story.

We are entering the next phase of the bull market, which is likely to be bumpy as we are in this transition phase, where we are moving from an environment of very very high liquidity to an environment of high liquidity. Before the baton shifts from liquidity to profit growth, we have a lot of other irritants along the way like the Omicron variants of COVID, which is happening in Turkey (economy). But, the next few years are going to be phenomenal because very rarely do you generally see everything fall into place.

What we do is if we find a stock we’re bullish on and a valuation we reasonably like, we go ahead and invest. Maybe I invest 70-80% and keep the balance to optimize the timing a bit.

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Opinion: Selling lucrative stocks in a bull market is a tough decision, but you’ll thank yourself when the bears take matters into their own hands https://winterhost.org/opinion-selling-lucrative-stocks-in-a-bull-market-is-a-tough-decision-but-youll-thank-yourself-when-the-bears-take-matters-into-their-own-hands/ Thu, 30 Dec 2021 23:41:00 +0000 https://winterhost.org/opinion-selling-lucrative-stocks-in-a-bull-market-is-a-tough-decision-but-youll-thank-yourself-when-the-bears-take-matters-into-their-own-hands/ It’s human nature that when things are going well, we tend to postpone basic maintenance. Who hasn’t let more than six months go by between dental visits or traveled more than 5,000 miles between oil changes? The same often happens with our investment portfolios. When the stock market moves like gangbusters, we tend to think […]]]>

It’s human nature that when things are going well, we tend to postpone basic maintenance. Who hasn’t let more than six months go by between dental visits or traveled more than 5,000 miles between oil changes?

The same often happens with our investment portfolios. When the stock market moves like gangbusters, we tend to think that the good times will never end.

And why tinker with success? After all, the S&P 500 SPX,
-0.26%
reached over 50 records in 2021 alone. Some of the bigger stocks continue to grow faster. It took almost 40 years for Apple AAPL,
-0.35%
become the # 1 trillion dollar company in terms of market capitalization. It hit that plateau in 2018 and only took two more years to reach a value of $ 2 trillion. Nowadays, Microsoft MSFT,
-0.88%,
Alphabet (Google) GOOGL,
-0.92%,
Amazon.com AMZN,
-1.14%,
Tesla TSLA,
-1.27%
and Meta Platforms (Facebook) FB,
-2.33%
have also joined the trillion dollar club.

But at some point the music will stop. Inflation is expected to continue into 2022 and beyond. In response, the Federal Reserve is expected to raise short-term interest rates several times over the next year, making it more expensive for consumers to borrow money for large purchases and for businesses already struggling with it. extremely slim profit margins. Nervous investors may sell off some of their stocks to reduce their exposure to stocks.

Should we do the same? It depends on whether your portfolio follows an asset allocation strategy with a targeted mix of investments in stocks, bonds and cash that reflects your savings goals, timing and tolerance for risk. Even if it does, at some point you’ll want to adjust it using a sensible portfolio rebalancing strategy.

Rebalance now for the coming year

Why is a rebalancing necessary? Because over time, asset weights get out of sync as values ​​move up and down. For example, divide the value of stocks held in your investment account by the total value of the account. The result will be its current percentage of shares. In this bull market, there is a good chance that the percentage is higher than you expected.

Among investment professionals, this is called “overweighting”. While this can lead to impressive returns when the market is hot, overweighting a predetermined asset allocation exposes you to greater losses in the event of a sell-off.

The time to think about rebalancing is not when the market is going through wild gyrations. If a financial advisor manages your account, your account will generally be rebalanced each year, at the end of the year and at the start of a new year.

If you want to rebalance yourself, check your latest account statements. Determine how much you might need to sell of your equity holdings to restore your target weightings.

If you think the stock market has a lot more upside potential, you might want to keep your equity allocation a little higher. Conversely, if you are about to retire and are concerned about eroding the value of your retirement nest egg, you can change your asset allocation to a more conservative combination, like 50% bonds. , 40% shares and 10% cash.

Beyond percentages, you’ll also want to look “under the hood” of the portfolio to identify some issues that, if left unaddressed, could negatively impact the effectiveness of your investment.

Reduce exposure to Big Tech

In terms of market capitalization, let’s go back to these five biggest American companies – Facebook, Apple, Alphabet (Google), Microsoft and Amazon. These five represent 20% of the entire S&P 500 and 40% of the NASDAQ COMP Composite Index,
-0.61%.

If you invest in an S&P 500 index fund or ETF or more actively managed large cap funds, you will likely see these tech stocks at the top of their holdings lists. If you own more than one of these funds, it means that a large portion of your shares are concentrated in these companies.

What if one or more of them has a hard time or if government regulators decide to change or break their business models?

Selling some of these large-cap equity funds as part of your rebalancing strategy and reinvesting the proceeds in bonds can reduce your exposure to Big Tech while restoring your target weightings. You can also consider selling a little more and investing in small to mid-cap funds, which don’t invest in giant tech stocks.

It can also be a good time to review capital spending. If the fees charged by your funds are not justified by their poor performance, consider moving that money to lower cost index funds and ETFs.

Don’t forget about taxes

If you are rebalancing in a taxable account, you will need to pay special attention to capital gains resulting from the sale of a stock, bond, or fund at a profit. If you sell any of these securities after holding them for less than a year, the profits will be taxed as ordinary income. If you hold them for more than a year, you’ll have to pay long-term capital gains taxes, which can be as high as 20% depending on your adjusted gross income.

To help reduce the tax consequences, see if you can take advantage of a strategy the pros call tax-loss harvesting. It simply means selling shares of a security or fund that you have lost money on to generate capital losses that you can use to reduce capital gains when you sell other investments at a profit.

It’s relatively easy to do with stocks. This is more difficult to do with mutual funds and ETFs because the calculation of the cost base (what you paid for the stocks) is not always clear. There are several strategies you can use to potentially increase your cost base, but they are complicated and require a lot of homework to do properly.

If you feel that you can’t make these decisions on your own, consider partnering with an experienced, paid-only advisor who is legally bound to act in your best interests. They can analyze your current portfolio and asset allocation strategy, identify risks of overweighting and overconcentration, audit investment costs and recommend actions that can restore optimal balance in a more profitable and tax efficient manner. .

Pam Krueger is the creator and host of the award-winning show MoneyTrack nationally seen investor education television series on PBS. She is also the founder and CEO of Wealthramp.com, an SEC-registered advisor matchmaking platform that connects consumers with licensed and qualified financial advisers.

Following: How often should you check your wallet?

Read also : Look for the best dividend paying stocks to stay in the money in 2022 and beyond


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What will it take to kill this bull market? We will find out next year. https://winterhost.org/what-will-it-take-to-kill-this-bull-market-we-will-find-out-next-year/ Fri, 24 Dec 2021 01:18:45 +0000 https://winterhost.org/what-will-it-take-to-kill-this-bull-market-we-will-find-out-next-year/ The insurgency, infections and inflation are what will be remembered for 2021. But none of them seemed to matter to US equities, at least as much as some might have thought. Again, the best thing for investors to do would have been to turn off their computers, phones and (especially) televisions, and set up and […]]]>

The insurgency, infections and inflation are what will be remembered for 2021. But none of them seemed to matter to US equities, at least as much as some might have thought. Again, the best thing for investors to do would have been to turn off their computers, phones and (especially) televisions, and set up and forget about their wallets.

The Stock Exchange would have amply rewarded those who turned a blind eye and who rolled the year in the indices of large caps. For this they would have been rewarded with a total return of 25.52% in the


SPDR S&P 500

exchange-traded funds (ticker: SPY) from early 2021 to Wednesday, according to Morningstar. (We’ll be looking at ETF returns since that’s how most people play at home.)

Getting out of the benchmark large cap index was generally not worth the risk or the effort. Small caps followed with less than half the return of their big brothers, with a cumulative return of 12.34% on the


iShares Russell 2000

ETF (IWM). Venturing abroad didn’t pay off either, with the


Vanguard FTSE All-World outside the United States

ETF (VEU) returning only 6.32%. Credit (or blame) less developed markets; the


iShares MSCI Emerging Markets

ETF (EEM) posted a negative return of 4.87%, and the


iShares MSCI China

ETF (MCHI) took a 22.02% hit.

The bonds did not pay off with the


iShares Core US Aggregate Bond

The ETF (AGG) has posted a negative return of 1.63% year-to-date, although the


iShares iBoxx $ High Yield Corporate Bond

ETF (HYG) managed a positive growth of 3.35%. But our income investment choice for 2021, closed leveraged loan funds, has almost kept pace with stocks. For example, a fund, the


Nuveen Variable Rate Income Opportunity

(JRO), returned 23.34%, with less risk than stocks.

Inflation, like Hemingway’s famous bankruptcy observation, started the year gradually and came suddenly. As 2021 approached, consumer prices were only increasing at a rate of 1.4% year-on-year, the result of deflation triggered by collapsing prices as the economy collapsed after the Covid-19 onset earlier in 2020, and well below the Federal Reserve’s Long-Term Target level of 2%. In January, Peter Boockvar, chief investment officer at Bleakley Advisory Group, in Lynx Eyes, began to warn of tightening supply that pushes up the prices of a wide range of products, from raw materials to DRAM chips. .

In the fall, supply chain issues were all over the evening news, with the weakest links appearing to be in ports where piles of containers with imported goods were waiting to be loaded onto trucks, which , with the drivers, were rare. And inflation was skyrocketing at a rate not seen in a generation, with the Consumer Price Index up 6.8% from the previous year, the fastest since 1982.

The narrowness of supply was only part of the problem. Another tax package totaling $ 1.9 trillion from the new Biden administration – in addition to the $ 900 billion package and the $ 2.1 trillion Cares Act passed the previous year – was being pumped into the American economy. More importantly, the Fed was supporting budget borrowing by purchasing Treasury securities at an annual rate of nearly $ 1,000 billion, as well as nearly $ 500 billion in agency mortgage-backed securities to help boost the economy. lodging.

All in all, James Paulsen, the Leuthold Group’s chief investment strategist, observed in January that money supply growth was four times faster and the federal deficit was four times larger than the last time the market was work was at a similar level. It all amounted to “too much cowbell”, as in the classic Saturday Night Live sketch, which foreshadowed much higher inflation.

Where the resulting inflation has manifested itself, but is not directly reflected in the price indices, is in housing. Earlier this year, Fed Chairman Jerome Powell called the new double-digit house price spike a pandemic-linked ‘transient phenomenon’ sending young families fleeing city apartments for single-family homes. with enough space to work from home.

In September, however, house prices were skyrocketing at a rate of nearly 20%, according to the most recent reading of the CoreLogic Case-Shiller Indexes. But, as former AllianceBernstein chief economist Joseph Carson pointed out late last month, homeowners’ equivalent rent (the convoluted way housing costs are counted in the CPI) has increased by less. by 3% compared to a year ago.

There is typically a six to 12-month lag before this rent metric catches up with soaring house prices, he observed. By then, he added, homeowners’ shelter costs, which account for nearly a quarter of the overall CPI, will increase retail prices far more than the widely seen surge in car prices. occasion last spring.

House prices weren’t the only thing to explode. The year that comes to an end will be remembered for the manic speculation about what has been called the memes stocks touted on websites like Reddit. As sports betting is reduced by the coronavirus, punters have turned their bets to companies that stand out mainly through bets placed against them. And with “stimuli,” Uncle Sam’s stimulus checks, free phone trading apps, and excess free time, these self-proclaimed “monkeys” have sought to take on the big and bad short sellers.

Whatever the motivation of the sans-culotte speculators, the source of much of their stake is the US Treasury, which has borrowed money at the lowest interest rates in history as a result of the bank. central American setting the cost of money at zero. . In real terms, that is, after removing inflation, it is well below zero, below negative 1% for 10 years.

It is an axiom of finance that a low cost of money increases the value of assets. The present value of the future cash flows of an investment increases as the interest rate to finance that investment decreases. Cheap and abundant capital can justify all kinds of wild and wonderful investments, from electric vehicles to stationary bikes with tablets connected to cryptocurrencies with no intrinsic value that can fluctuate by 20% over the course of a weekend.

Besides the seemingly endless effects of the pandemic, the hallmark of financial markets in 2021 has been the power of money, invoked and created by central banks. It has welcomed government borrowing on a scale never seen in peacetime and has inflated asset values ​​to record highs. And it has the same effect on the prices of what is bought, which has placed inflation high on the list of concerns of the public and politicians.

Next year, part of that process will start to reverse. Printing less money can slow down the process of increasing prices, but the impact is likely to be uneven. This may very well affect the prices of securities first, then the prices of goods and services. And the descent may be less pleasant than the climb.

Read more From top to bottom of Wall Street:Omicron is booming. Inflation is on the rise. But investors dream of a gathering of Santa Claus

Write to Randall W. Forsyth at randall.forsyth@barrons.com


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Is the bull market over after the sale of hedge funds? https://winterhost.org/is-the-bull-market-over-after-the-sale-of-hedge-funds/ Fri, 24 Dec 2021 00:46:08 +0000 https://winterhost.org/is-the-bull-market-over-after-the-sale-of-hedge-funds/ The big sellers in December were hedge funds, which, chastised by reverse bets on top-flight software companies, spent the month cutting back on high-momentum trades. This helped make it one of the most volatile year-endings for large-cap tech over the past decade, with the absolute size of closing moves in the Nasdaq 100 reaching around […]]]>

The big sellers in December were hedge funds, which, chastised by reverse bets on top-flight software companies, spent the month cutting back on high-momentum trades. This helped make it one of the most volatile year-endings for large-cap tech over the past decade, with the absolute size of closing moves in the Nasdaq 100 reaching around 1.4%.

As a three-day rally restored order to the now 26% higher S&P 500 in 2021, doubts remain about omicron’s path and how central banks will tackle inflation. The rebound that took the index to an all-time high followed a period of liquidity building up and retail investors, the die-hards who once flocked to bullish options for quick profits, worried about the decline.

“With risk having been significantly reduced and investors now looking beyond omicron, there is now a lack of an offer to sell as the momentum has changed,” said Eric Johnston, head of equity derivatives and investments. multi-active products at Cantor Fitzgerald. the rally is likely to be short.

“The bull market as we knew it, I think, is over,” said Johnston. “The system’s liquidity drain and the Fed’s tighter overall policy will be a headwind for risk taking.”

Surprisingly strong earnings and optimism about the economy have propelled the S&P 500 to nearly 70 all-time highs this year, on course for the second-best annual record of all time. Signs that omicron may not be as deadly as other strains of the virus have clashed with continued news of business closures and global travel restrictions threatening growth.

A newly hawkish Federal Reserve also adds to the lack of conviction that characterized December. The S&P 500 has alternated gains and losses each week, each with moves exceeding 1%.

For those who have watched the S&P 500 double in 20 months and are worried about bubble valuations, rising skepticism may be a welcome development, putting the market on a healthy footing. For opponents, all the caution suggests that the skeptics may have been swept aside and that a bit of good news could spark market gains. JPMorgan Chase & Co. thinks so. Strategists led by Marko Kolanovic have predicted a strong recovery in the new year, as positions reverse the bears.

Avoiding risk now could be a mistake, says Andrew Slimmon, senior portfolio manager at Morgan Stanley Investment Management.

“It’s too early to turn bearish, to think the market is down because corporate fundamentals are going to continue to be strong,” Slimmon said in an interview with Kailey Leinz on Bloomberg TV. “There will be opportunities to take advantage of what the market offers, but you have to be prepared to go against the grain, and that means taking more risk here today.”

Despite this week’s rebound, the risk-taking spirit has taken repeated chunks of late. While the S&P 500 managed to post all-time highs in December, the pain below the surface is brutal. In recent weeks, the Russell 2000 small cap has fallen into a 10% correction, newly created stocks have slumped into a 20% bearish drop, and a group of profitless tech companies have plunged nearly 30 %.

The carnage in the riskiest corners dealt a particularly heavy blow to hedge funds which had crammed into high-growth, high-valuation stocks, causing a swift unwinding. In recent weeks, their net exposure to expensive tech stocks and those that have yet to make any money has fallen by around 4 percentage points to around 14%, the lowest level since mid-2020. , according to data compiled by senior broker Morgan Stanley.

The feeling of risk aversion was echoed by the latest Bank of America Corp. survey. In this poll, global fund managers this month increased their liquidity to the highest level since May 2020 while reducing their exposure to equities to a 13-month low.

Among amateur investors, the once-wild gambling spirit is fading. Tracking data on small lot options trading, a proxy for retail activity, Susquehanna International Group found that its stake was declining on the call options side while increasing on the options side. sale.

Certainly, the belief persists. A week ago, when the S&P 500 fell every day but one, investors put $ 30 billion in exchange-traded funds with a focus on U.S. stocks, the largest inflow since March.

A closer look at stock performance revealed a clear preference for safety. Companies with stable incomes and dividends, such as utilities, health care and consumer staples, topped the December rankings, each increasing about 7% as a group.

“Investor confidence is somewhat limited,” said Nicholas Colas, co-founder of DataTrek Research. His company just conducted a survey of the market outlook for 2022 and found that the majority believed the S&P 500 would be up less than 10%. No wonder December is proving difficult, because if an investor thinks next year’s gains will be limited, then selling before an average year is a solid strategy. “

This story was posted from an agency feed with no text editing. Only the title has been changed.

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Lark Davis’ 7 Reasons For The Bull Market To Continue Through 2022 https://winterhost.org/lark-davis-7-reasons-for-the-bull-market-to-continue-through-2022/ Wed, 22 Dec 2021 08:51:00 +0000 https://winterhost.org/lark-davis-7-reasons-for-the-bull-market-to-continue-through-2022/ Famous crypto influencer Lark Davis has listed seven reasons why the cryptocurrency bull market will continue in 2022. Lark Davis is one of the most well-known cryptocurrency influencers. His YouTube channel has more than 473,000 subscribers. His Twitter account is followed by more than 757,000 people. In a recent post series of tweets, he shared […]]]>

Famous crypto influencer Lark Davis has listed seven reasons why the cryptocurrency bull market will continue in 2022.

Lark Davis is one of the most well-known cryptocurrency influencers. His YouTube channel has more than 473,000 subscribers.

His Twitter account is followed by more than 757,000 people. In a recent post series of tweets, he shared 7 reasons why the cryptocurrency rally will continue in 2022.

Among the most important reasons, Lark Davis mentions the upcoming spot ETF for bitcoin (BTC). He also mentions the phenomenon of lengthening of cycles and the significant improvements of the Ethereum network (ETH).

Additionally, he mentions bullish expectations for bigger altcoins. It highlights the importance of the NFT market and blockchain games. And, directs attention to institutional investors. Here we are!

1. Spot ETF for Bitcoin

The first reason Lark Davis presents is the long-awaited spot ETF (exchange-traded fund) for Bitcoin.

As reported by BeInCrypto, the very first ETF for Bitcoin was approved in October. However, it is a fund based on cash settled futures rather than physical Bitcoin in the cash market.

Therefore, the cryptocurrency community is still waiting for an ETF directly linked to the spot price of BTC. Currently, the ETF is only tied to paper bets on its future movements.

According to Davis, a spot ETF should be accepted in 2022. Predicting the possible impact on the price of Bitcoin, the influencer refers to the analogous situation in the gold market. He declares:

“For reference, gold saw a strong rally ahead of the spot ETF’s approval, followed by a year of falling prices followed by a multi-year mega rally.”

Source: Twitter

2. Lark Davis and Bitcoin’s lengthening cycles

The phenomenon of lengthening cycles of Bitcoin and the entire cryptocurrency market is already more than a hypothesis.

Historical analysis indicates that each successive BTC cycle has been longer than the last, and the importance of the four-year halving pace is slowly decreasing. Additionally, the return on investment on successive cycles also decreases, so hodlers should expect lower returns over time.

Therefore, Lark Davis argues that due to lengthening cycles, the peak of the BTC price in this bull market will be in 2022.

It refers here to the analysis of Benjamin Cowen, with whom BeInCrypto recently had the opportunity to discuss the same subject. Further, Davis points out that if this happens, “the 4-year cycle theory is (probably) dead.”

Source: Twitter

It should be added that Cowen himself points out that there is a possibility that the current bull market peak may occur even in 2023. In his view, each subsequent cycle extends from 1 to 1.5 years.

3. Ethereum network upgrades

Another important catalyst for the protracted bull market is the development of the Ethereum blockchain (ETH).

This network is steadily increasing its share of the cryptocurrency market, and at press time its dominance is 20%, according to CoinGecko. Additionally, ETH’s $ 450 billion market capitalization already represents over 50% of BTC’s $ 888 billion market capitalization.

Source: CoinGecko

Among the major changes that Ethereum is undergoing, Lark Davis lists: the transition to the Proof-of-Stake protocol, the triple halving, the limited deployment of sharding, which should lead to a 3- to 4-fold increase in transactions per second.

The implementation of most of these changes is scheduled for 2022, hence the possible extension of the bull market to the actual implementation of these changes. The influencer then adds:

“ETH remains the king of smart contracts, so what’s happening there has implications for the entire market.”

4. Development of the main altcoins

The fourth reason on Davis’ list is the rapid growth of major blockchain networks alternative to Bitcoin and Ethereum.

The gradual diversification of the crypto market is a healthy sign of a growing and rapidly changing industry. At the same time, it takes time for sustainable growth. The innovation of the best projects will not slow down in 2022.

At the forefront of dominant altcoins, Lark Davis lists Polkadot (DOT) and Cardano (ADA). Their networks are “going online, which will bring more money to the market.”

He adds to this list the development of other Layer 2 solutions that have seen rapid growth in 2021. These include Avalanche (AVAX), Polygon (MATIC) and Solana (SOL).

5. Lark Davis summarizes the NFT market

The development of the NFT market has been very dynamic in 2021. Every week, new sales records for digital artworks, songs by famous artists or flagship pieces from the CryptoPunks or Bored Apes collections have been reported.

In addition, more and more well-known brands are choosing to release their own NFT collections in search of new channels to reach their audience.

This month, BeInCrypto announced that the Bundesliga, Germany’s top soccer league, and Ubisoft, the world’s largest video game publisher, have decided to take similar action.

Lark Davis emphasizes the importance of NFT as a gateway to mass adoption of cryptocurrencies:

“NFTs continue to capture public interest and brands are gaining ground. NFTs will be a first point of access for millions of people to crypto.

The sixth argument for expanding the cryptocurrency bull market through 2022 is the development of blockchain-based video games and metaverse projects. Many big projects in this niche are still in development, with major games announced for next year.

This doesn’t change the fact that the price of virtual land in the biggest blockchain games is already rising rapidly.

At the end of November, BeInCrypto announced the sale of land to Axie Infinity (AXS) for a record amount of $ 2.3 million. Previously, land in Decentraland (MANA) had been sold for $ 900,000 in June of this year.

An additional catalyst for the adoption and popularity of blockchain-based video games is the growth of the Play-to-Earn (P2E) industry.

It allows video game fans to indulge their hobby while earning cryptocurrencies which they can then exchange for local fiat currencies. For example, many P2E industry players in the Philippines make a living from playing their favorite titles.

Highlighting the potential influx of new users and money into the crypto market in 2022, Lark Davis briefly comments:

“The game will attract tens of millions or more of new users. The metaverse is a multi-billion dollar future industry.

7. Lark Davis: big institutional money

The final argument for extending the bull market until 2022 is money from institutional investors.

According to Davis, they are only beginning to realize that this is the best class of tech investment this decade. Reports of MicroStrategy’s upcoming big Bitcoin buys are now almost routine.

However, Michael Saylor’s company is joined by other large investor groups, for example South Koreans.

More and more US cities are introducing the option of paying their salaries in BTC or launching crypto retirement plans. An influx of large sums of money from institutions is predicted by Cathie Wood, according to whom an allocation of just 5% of their funds will push the price of BTC to $ 500,000.

Above all, Lark Davis points to runaway inflation, which will further boost the value of deflationary cryptocurrencies. In conclusion, Davis points out that “the mega bullish cycle will probably end in 2022”.

He then adds that the next bear market will be “fundamentally different” and encourages upward profit taking.

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All information on our website is posted in good faith and for general information purposes only. Any action that the reader takes with the information found on our website is strictly at his own risk.



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Retail investors surfing bull market could spark populist backlash https://winterhost.org/retail-investors-surfing-bull-market-could-spark-populist-backlash/ Sun, 19 Dec 2021 08:00:00 +0000 https://winterhost.org/retail-investors-surfing-bull-market-could-spark-populist-backlash/ Arguably the 2021 bull market is the same one that started in 2009, with one big change. Retail investors, who have been on the sidelines for so many years, rushed after the pandemic-induced flash crash last year and have since bought every trough with growing enthusiasm. They represent not only a new cohort of investors, […]]]>

Arguably the 2021 bull market is the same one that started in 2009, with one big change. Retail investors, who have been on the sidelines for so many years, rushed after the pandemic-induced flash crash last year and have since bought every trough with growing enthusiasm. They represent not only a new cohort of investors, but a new voting bloc, increasing the risk of a populist backlash if one of the dips turns into another bear market.

Remember that policymakers played a big role in triggering this craze. Armed with supportive checks from the government and fresh liquidity from central banks, new investors began to pour part of their income into the markets, helping to boost the bull run in a 13th year.

More than 15 million Americans downloaded trading apps during the pandemic, and surveys show many of them are young first-time buyers. Retail investors have also been hyperactive in Europe, doubling their share of daily trading volume, and in emerging markets from India to the Philippines.

In total, U.S. investors alone invested more than $ 1 billion in stocks around the world in 2021, three times the previous record and more than the previous 20 years combined. After declining for the past decade, US households have overtaken corporations as the main contributors to net demand for equities in 2020. They now hold 12 times more equities than hedge funds.

Media coverage tends to peak at the wackier times, like when the Robinhood crowd went gaga for GameStop and other meme stocks last winter, but the excitement never slowed down. Retail investor “interest”, as measured by Internet searches for popular market news and outlets, continued to soar. U.S. households bought at an astonishing rate throughout 2021, peaking in the third quarter when their holdings of equities increased by more than 16% from the previous year. This level of new retail flows matches the previous record set in 1963.

Sadly, going back to the crash of 1929, one of the common characteristics of bull markets is that retail investors get hold of them too late. Today, they continue to buy even as corporate insiders sell record amounts, with insider sales exceeding $ 60 billion this year. And insiders have the opposite result: they tend to sell to the strongest. If the market were to turn sharply, the fact that top CEOs decided to reduce their risk in time will only encourage outrage among small investors who did not.

Instead of advising caution, however, Democrats and Republicans, in a rare display of bipartisan unity, applauded the “democratization” of the markets and defended the right of Americans to freely speculate in the actions of memes – even if it did. seems irrational.

Another harbinger of impending turmoil in the markets is massive borrowing to buy stocks or margin debt. Net margin debt in the United States now stands at 2% of GDP, a record since the record highs began three decades ago. Much of it is borne by retail investors: Their borrowing to buy stocks has risen by more than 50% over the past year to record highs, just like before the crashes of 2001 and 2008.

The democratization of the markets would be an unadulterated good, if the risks were managed wisely. Big players have never had access to ‘smart money’, and this is perhaps truer than ever, as internet technology has at least partially equalized access to market information for investors. of all sizes. Retail investors aren’t the only ones showing signs of insanity, which are also visible in the IPOs, mergers and art markets.

But many retail investors place their bets in a highly speculative manner, such as buying overnight call options or low face value stocks that are easy to raise. It’s a surreal sign of a confusing time to hear overtly socialist political leaders championing extreme capitalist risk-taking by an investor class that includes many low- and middle-income voters.

The result is a historically overvalued, over-owned and, to an perhaps unprecedented extent, politically flammable market. Americans now have an unusually high level of savings, and the portion of their portfolios they hold in stocks is now an all-time high, dating back to 1950.

None of this necessarily signals an impending crash. There is still a lot of liquidity flowing through the system and even some of the most sophisticated investors worry that there is no other option but to own stocks with such low interest rates. . But after doing so much to inspire this retail investor fad, governments and central banks could face a major backlash when the next bear market inevitably arrives.

The writer, chief global strategist of Morgan Stanley Investment Management, is the author of “The Ten Rules of Successful Nations”


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Elections will cast a shadow over the 2022 bull market https://winterhost.org/elections-will-cast-a-shadow-over-the-2022-bull-market/ Wed, 15 Dec 2021 21:39:05 +0000 https://winterhost.org/elections-will-cast-a-shadow-over-the-2022-bull-market/ As we emerge from lockdowns and live in a ‘Covid standard’ environment, stronger economic growth combined with still very low interest rates by historical standards should be good for corporate profits, which in turn should be good for the stock price. We may have to learn to live with higher inflation, but unless Omicron gets […]]]>

As we emerge from lockdowns and live in a ‘Covid standard’ environment, stronger economic growth combined with still very low interest rates by historical standards should be good for corporate profits, which in turn should be good for the stock price. We may have to learn to live with higher inflation, but unless Omicron gets out of hand or some other “black swan,” 2022 looks pretty good for the stock markets.

But a risk to this scenario are the elections – the federal elections in Australia in May and the midterm elections in the United States in November.

Markets hate elections for three reasons. First, they are not good for consumer confidence, leading to a postponement of major lifestyle and spending initiatives. Sales of homes, new cars and other discretionary purchases tend to be put on the back burner as consumers wait to see what happens. Since discretionary retailers and other consumer-focused businesses are vulnerable to a small shift in sales, any delay can have a pretty big impact on their immediate profits.

Then, during an election campaign, politicians can and do make “crazy” promises and commitments. These can work for a particular business as much as they can work against it, but the risk is focused on the downside. For example, a new tax on banks, or the elimination of the diesel fuel tax refund (impacting resource, transportation and manufacturing companies). The risk is enough to arouse the suspicion of equity investors.

Finally, there is the risk that there will be a change of government and the relay passes to the “left socialists” of the ALP. Australians know that in government there is no real difference between the ALP and the Liberal Party / Nation coalition, it is more a question of inclination and direction. But this is not always how foreign investors perceive it, who tend to view Australian governments as “left” or “right”.

The key thing to remember about foreign investors is that in many cases they don’t have to invest in Australia. We are too small to have an impact on the performance of the portfolio, so they are either “overweighted” in Australia or not invested at all. There is rarely an intermediate position. And to be overweight, they want to make sure that the political and economic environment is right – so the possibility of a government change to a left party is negative.

Opposition leader Anthony Albanese is already campaigning and appears to be adopting a “small target” strategy. He leads the opinion polls, with the latest Newspoll putting the two-party favorite tally at 53% for the ALP and 47% for the Coalition. The main vote for the Liberal / National Party Coalition is only 36%, down from 41% in 2019.

The Morgan poll was even worse for the coalition, putting the PLA in the lead on a base preferred by both parties at a staggering 56.5% to 43.5%.

While it is easy to dismiss opinion polls on the back of their failure with Brexit and predict a victory for Scomo in 2019, the ALP has been leading the polls since June and the margin has widened. Perceptions that Scomo messed up the vaccine rollout (‘it’s not a race’), the division on climate change, sports and a general unease with a government coming to the end of three terms are contributing to the dissatisfaction of the population. voters.

According to bookmakers, the preferred election date is May 7, just before May 14 or the last date a normal election can take place with a half-senate election, May 21. There is still the outward possibility of an election on March 5. or even before Easter on April 9, but it looks like Scomo’s strategy is an early budget with tax cuts followed by a vote in May. In any event, this means that for the first half of 2022, the Australian stock market will be distracted by the election.

Midterm elections in the United States will be held on November 8. This will see the 435 House of Representatives seats and 34 of the 100 Senate seats contested. There will also be 39 elections for state and territory governors and many more state and local elections.

With center-right Republicans slated to regain control of both houses, on paper that could be good for U.S. stock markets. However, with a weakened Joe Biden in the White House, arguably somewhat of a “lame” president for the next two years, a lingering blockage in Washington is likely. A perceived inability to address key issues such as the budget deficit, social inequalities and climate change could be negative overall.

2022 should be a good year for stock investors, but elections at home and abroad will create enough uncertainty for investors to be wary. When investors are suspicious, a buyer’s strike becomes an obvious possibility. This might not stop the bull market, but it could cap gains and lead to higher volatility. Factors to consider when investing in 2022.


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These 2 high-growth stocks could fuel the next record-breaking bull market run https://winterhost.org/these-2-high-growth-stocks-could-fuel-the-next-record-breaking-bull-market-run/ Wed, 15 Dec 2021 11:15:00 +0000 https://winterhost.org/these-2-high-growth-stocks-could-fuel-the-next-record-breaking-bull-market-run/ Growth stocks have fallen out of favor over the past month; many have fallen noticeably above highs, and investors are trying to determine when there might be a rebound. But when the going is dark, the winners often lead the comeback and drive the market up. Both of these stocks have been big winners since […]]]>

Growth stocks have fallen out of favor over the past month; many have fallen noticeably above highs, and investors are trying to determine when there might be a rebound. But when the going is dark, the winners often lead the comeback and drive the market up.

Both of these stocks have been big winners since the pandemic lows of March 2020 and still have the growth and fundamentals to continue pushing higher. They could fuel the next market bull run.

Image source: Getty Images

To block

Money and the way it moves between consumers and businesses evolve, and the fintech society To block (NYSE: SQ) (formerly Square) is at the forefront of this evolution. Its point of sale (POS) terminals and software have made it easier for small businesses to accept digital payments than ever before, while its Cash App ecosystem disrupts the traditional relationship between consumer and bank.

Banks have been around for centuries and are built on outdated “DNA”, so to speak. They have physical branches that are expensive to operate and are slow to embrace change. The average bank spends a lot of money on acquiring a new customer – the amount can range from $ 1,500 to $ 2,000.

Block is a digital business model; users only need to download Cash App on their phone to access all of its features. The company can acquire customers for as little as $ 5, giving it a significant financial advantage over traditional banks.

The company tracks gross profit growth as its primary indicator of company performance because Bitcoin Cash App transactions can skew revenue growth figures. In Q3 2021, Block’s gross margin increased 43% year-on-year to $ 1.13 billion, with the POS ecosystem and the Cash app contributing almost equal amounts.

Cash App could become Block’s main activity in the years to come; it recently opened up to teens in the United States between the ages of 13 and 17, a demographic of around 20 million. Cash App is also aggressively marketed to millennials with the goal of building a financial relationship with individuals earlier, so that it can be profitable when they are entering their prime earning years.

The block acquires After payment, a Buy Now, Pay Later (BNPL) company, for $ 29 billion in shares to add as a feature for Cash App users. This is another tool that could attract young users to the Cash App ecosystem. BNPL is a rapidly growing consumer credit segment that could grow 15-fold from its current size by 2025.

Block’s stock is trading at nearly $ 180 in 52 weeks, down more than 30% from its highs. The stock’s price-to-sell (P / S) ratio is just over 5, its lowest since the height of the pandemic. However, I think this $ 78 billion market-cap company is still fundamentally strong and performing enough to help fuel the indexes should a leak occur.

Limited sea

The people of Southeast Asia are among the most internet-savvy in the world, which has made it a gold mine for the Singapore-based internet company. Limited sea (NYSE: SE). The company operates a three-headed business model that includes gaming, e-commerce and fintech segments.

Sea has grown its turnover by an average of 71% per year over the past five years, thanks to a Southeast Asian customer base of 670 million people who are young (50% of the population under 30 years old) and spend an average of eight hours per day connected online.

Its game segment created Freefire, one of the world’s most popular mobile games, and is the company’s main cash cow. In Sea’s third quarter 2021, gaming generated nearly $ 1.1 billion in revenue, of which $ 715 million went into EBITDA (earnings before interest, taxes, depreciation and amortization). The profitability of the gaming business helps finance investments in unprofitable segments of e-commerce and fintech.

The investment of its gaming profits in the business has allowed Sea Limited to aggressively expand into new markets like Latin America, Poland and India. Freefire is also a great corner; its popularity in these new markets helps Sea to link its e-commerce business with advertisements and promotions to attract customers.

During the pandemic, Sea was a big winner, rising from nearly $ 50 to $ 372 before the recent pull-out brought the shares down to around $ 222. Sea is just starting to gain traction in these new markets, so the company could see continued revenue growth for the foreseeable future. The stock has a market cap of $ 123 billion, which is why I think Sea’s strong growth could help push the market higher when it hits new highs.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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“Clear” below the calm surface of the bull market https://winterhost.org/clear-below-the-calm-surface-of-the-bull-market/ Tue, 14 Dec 2021 08:00:00 +0000 https://winterhost.org/clear-below-the-calm-surface-of-the-bull-market/ “Annihilate” is an apt description of what is going on beneath the calm surface of the bull market. As we approach the end of the year, many are hoping “Santa Claus to visit Broad and Wall.” However, those hopes are not just about adding to this year’s already excessive annual gains. Instead, for many, it […]]]>

“Annihilate” is an apt description of what is going on beneath the calm surface of the bull market.

As we approach the end of the year, many are hoping “Santa Claus to visit Broad and Wall.” However, those hopes are not just about adding to this year’s already excessive annual gains. Instead, for many, it is the hope of recovering from brutal losses.

If you haven’t paid it much attention, the market is currently near its all-time highs. While it has increased by almost 26% this year, there have been a few very normal 5% fixes along the way.

Looking at the chart, you would assume that the performance across the entire index was roughly even. However, that would be a wrong assumption.

As the old saying goes:

“You can’t judge a book by its cover.”

Market capitalization weighted illusion

One of the problems in financial markets today is the illusion of performance. This illusion is created by the largest stocks weighted by market capitalization. (Market capitalization is calculated by multiplying a company’s price by its number of outstanding shares.)

In particular, with the exception of, the main stock market indices are weighted by market capitalization. Therefore, as a company’s stock price appreciates, it becomes a more important component of the index. This means that the most important changes in the price of stocks have a disproportionate influence on the index.

You will recognize the names of the top 10 stocks in the index.

Market capitalization of the top 10 stocks of the S&P 500 index” src=”https://d1-invdn-com.investing.com/content/pic7f761b0e876be0c56740879ba72c9a7e.png” alt=”Market capitalization of the top 10 stocks of the S&P 500 index”/>

Market capitalization of the top 10 stocks of the S&P 500 index

Currently, the top 10 stocks in the index represent more than a third of the entire index. In other words, a 1% gain in the top 10 stocks equals a 1% gain in the bottom 90%.

Contribution of the top 10 to the S&P 500 index

Contribution of the top 10 to the S&P 500 index

Another look at contribution asymmetry is to compare the number of companies it would take to understand the same weighting. Currently, out of 500 stocks, the lowest 432 stocks have the same market cap as the top 10.

Top-10-Capitalzation Vs Bottom 432

Top-10-Capitalzation Vs Bottom 432

This is the story of 2021. Without the huge returns from companies like Apple (NASDAQ :), Google (NASDAQ :), Microsoft (NASDAQ :), Tesla (NASDAQ 🙂 and NVIDIA (NASDAQ :), the years of return would be very different.

Top 10 YTD-Yield stocks

Below the surface, the damage is evident

As noted, without the backing of the Top 10 stocks, year-to-date returns and overall volatility would be quite different.

However, by examining a sample of the most “popular” trading stocks, you can understand the frustration of current retail traders. A large majority of high-profile stocks in 2020 and early 2021 are down significantly from their respective 52-week highs.

Most traded stocks by retail investors

Most traded stocks by retail investors

Of course, probably one of the best representations of the disparity between the index and the “to wipeoutside” Below the surface is the ARKK Innovation Fund (ARKK). In 2020, the media named Cathie Wood the best investor of the year. Millennials and Gen Z investors put money into his fund to chase upcoming next-gen tech stocks.

Unfortunately, that turned out to be a bad bet.

While the index is up around 25% in 2021, ARK Innovation ETF (NYSE 🙂 is down over 20%. It’s quite a performance differential, but it shows the disparity between mega-cap companies and everyone else.

S&P 500 vs ARKK Innovation Fund

S&P 500 vs ARKK Innovation Fund

However, it is NOT just the “even” stocks that significantly underperformed the index. If you had a diversified portfolio of small, medium, emerging and international stocks, the performance would be significantly lower than the S&P 500 Index. This is something we discussed in the

MPT fund return difference

MPT fund return difference

Globally, as noted Merchant of feelings, pretty much everything underperforms the S&P 500.

“The percentage of country ETFs outperforming the S&P 500 year-on-year has fallen to its lowest level since May 2020.”

global market outperforms the S&P 500″ src=”https://d1-invdn-com.investing.com/content/pic88ca03e6455184d1cd631aa2956d69d3.png” alt=”The global market outperforms the S&P 500″/>

The global market outperforms the S&P 500

As they conclude “

The strength is mainly evident in the United States, with foreign indexes showing an alarming level of relative underperformance. When trends have lagged like this in the past, the annualized returns of the MSCI indices have been mediocre.

A significant risk

The point to take away from this analysis is the significant risk posed to investors whose capital is hidden in a handful of stocks. Over the past few weeks, we have noted the in the markets, as well as a low breadth. To witness it:

The stock market is a function of buyers and sellers accepting a transaction at a specific price. Or rather, “for every seller there must be a buyer.”

This is why market declines tend to be a “annihilate” Rather than a “Recoil.”A good example recently was DocuSign (NASDAQ :).

DocuSign-Daily Graph

When there are not enough buyers at current prices to absorb increased selling pressure, prices increase. While there are indeed buyers for every seller, they are priced significantly lower.

However, during these “Erasures”, capital continues to flow into the main holdings of the index. This is because these stocks are very liquid. For traders, they offer a “Safe haven” move large amounts of capital without creating a gap between buyers and sellers.

However, if capital flows reverse from these top 10 stocks for any reason, the illusion of a strong market will quickly fade. Most likely, these flows will be invested in bonds for the sake of safety, as something has likely changed the bullish psychology of the market.

Just in case you’re wondering, buyers are much lower at Apple right now.

Apple Inc Daily Chart

While the top 10 holdings of the major indices continue to be a “Safe haven” for traders now, by 2022, i would be watching them closely. They will probably be the best indication of when the flight to safety has started.

Of course, if you held “even” stocks this year, the “annihilate” should already make you think about changing your investment strategy.


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