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Some great golf this weekend at Torrey Pines. Max and I spent the day there on Thursday and we had a blast. Last year I joined Silverleaf in Scottsdale which is the home course for John Rahm, Tony Finau and Max Homa. It has been a great year for all the golfers which no doubt they attribute to my joining the club, but an especially great one for John Rahm. Here is Max and I watching from the first tee.
Onwards to the markets and momentum…the big price moves this week were in software (to the upside) and ‘fear of inflation’ stocks (to the downside).
Here is this weeks Momentum Monday which you can watch/listen right here. I have embedded the YouTube right below:
The markets continue to see money rotate but not leave the market.
For the better part of 2021 so far, value stocks have outperformed growth stocks. The reason – the market was trying to price inflation not seen since the mid 2000s. As a result, the U.S. Dollar and the U.S. Treasuries took a dive while financials and basic materials skyrocketed. In the meantime, almost anything software or clean-tech related lost 30% to 80% in just a few months. It seems the market was woken up to the possibility that the inflation dangers might have been exaggerated or the fact that the Fed is actually ready to step off the gas.
Starting about two weeks ago, the whole inflation trade has been unwinding. What went up, pulled back. What was under pressure, has been rallying. Financials (XLF) are now down 9% from their 52week highs, basic materials (XLB) are down 6%, industrial metals (XME) are down 14%, homebuilders (XHB) are down 13%. Meanwhile, software stocks have been reborn. Many of them have been on a 30-40% ramp. Now, the big question is can the Nasdaq Composite continue higher while most non-tech sectors are pressured and already below their 50-day moving average. I think it can. Capital is not leaving the stock market. It is merely rotating between sectors and right now it’s tech’s time to shine. How long this is going to last is anyone’s guess. The market is a fickle machine. One day soon, it might decide to assume the inflation narrative again and start another rotation. There’s no reason to guess when. Price action will leave plenty of clues.
Following up with some regular links…here is this weeks ALWAYS FREE Stocktwits 25 lists where I start my investing week looking for leadership.
Here is Nikita’s weekly SPAC market update which is near and dear to my heart as a SPAC CEO ($SLAC)
The summer is here and with masks mostly off, the crowds in San Diego are back. Coronado beach is busy. There are alternatives to staring at the screens and talking about the markets.
Unless technology stocks also sell off, it should be a quiet summer.
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