Land of Confusion
The stock and bond markets are in "no man's land" but that's going to end soon
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.
IMPORTANT PROGRAMMING NOTE:
ROAR SCORE GOES PREMIUM-ONLY STARTING TOMORROW
One of the most frequent questions I get from paid subscribers is something like this: “Rob, the ROAR Score and the portfolio construction stuff you do that points to that is your secret sauce, some of your most unique work. Shouldn’t that be something people pay for?” 9 months into the ETFYourself.com venture, we decided YES to that.
The ROAR Scores stays at 10 for the moment. And starting with next week’s issue, or if I make an interim move in the score prior to that time, it will go to premium subscribers only. In addition, we plan some enhancements to the ROAR concept, including adding scores that target different investment time horizons, as well as degrees of reward/risk tradeoff.
The premium subscription is $40 a month or $400 for a full year, and we keep adding more and more to it, while slimming down the free version. There’s a good reason for that, as explained just below.
Those who prefer to simply be observers from a distance find out once a week what my high-level thoughts are, and can ask questions of us any time.
But those who are willing to try premium for $40 for a month, or a free trial (1 week) offer we have, get more ROAR, more specific commentary, ETF research (that part is about to REALLY expand!) and a live, working portfolio and depth chart to use as a baseline however they see fit, and know that I have my own money in it.