Episode 171: This downtrend is persistent. The pre-2016 market personality was one of “buy the dip” and move on to new highs. That’s no longer the case. Many sectors of the market are clearly in bear market territory, off their highs by 20-30%…or more. Even fashionable stocks have been tarnished- Disney down 23%, Apple down 30%, Tesla down 44%, and LinkedIn down 61%.
The market personality has clearly shifted to a defensive posture, with rotation into “safe” sectors like Utilities, Consumer Staples, and Telecoms. [In my opinion, all extremely overvalued.] This occurs, because large institutional investors can’t simply liquidate their holdings and move to cash. They’re required to stay invested. So during troubled times, they hunker down in vanilla positions, hoping to ride out the storm with minimal damage.
The outcome depends on the magnitude of the economic storm. Will these trouble times blow over, or will they develop into a Katrina level hurricane?
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