Another Sector Rotation
In March, people were talking about another Great Depression. Three months later, we are talking about new all-time highs and Nasdaq 10k. Other than Central Banks pumping liquidity into the system, no one can really explain why the market is going higher. It just is. What if rising prices turn into self-fulfilling prophecies and they actually help companies become stronger businesses? This is how reflexivity works.
Last week brought another round of sector rotations - the U.S. Dollar and Treasuries dove, the leaders in software and biotech took a break, while the so-called old-economy sectors shined and had a spectacular short squeeze. There’s some element of complacency in the market right now but the market can remain frothy longer than short-sellers can remain solvent. Don’t chase blindly extended stocks but be ready to welcome dips as buying opportunities.
The market continues to provide incredible trading opportunities on a daily basis. Here are just a few of the ideas and comments I shared with subscribers last week: