2019 seemed quite bullish, but comparing S&P constituents by size shows a clear divergence year to date:
- Large caps (blue)
SPY
are in an up-trend
- Mid caps (grey)
IJH
are sideways.
- But small caps (orange)
IJR
are in a downtrend ever since 2018 (lower highs & lows).
Not to say we're on the verge of a correction, but this shows that risk appetite (= smaller caps) is shrinking, not a sign of a healthy bull market. Perhaps this says we'll be in a sideways market for a while (months, years?), until risks shrink a bit. How to play this? Ideas:
- Avoid being too "one-sided"
- take profits when available (to avoid them turning into losses)
- many occasions will happen to accumulate quality names. So don't worry if you miss this or that awesome stock, another chance will come down the road. Just wait for some future Trump tweet ;-)
- get "time on your side": get paid to wait, either via options strategies or holding quality dividend paying stocks.
My take is we get another dip down later, perhaps as low as in Dec 2018 or lower. But until then don't hold your breath. Markets will have wild up & down swings, so be prepared to play both sides.
- Large caps (blue)
SPY
are in an up-trend - Mid caps (grey)
IJH
are sideways. - But small caps (orange)
IJR
are in a downtrend ever since 2018 (lower highs & lows). Not to say we're on the verge of a correction, but this shows that risk appetite (= smaller caps) is shrinking, not a sign of a healthy bull market. Perhaps this says we'll be in a sideways market for a while (months, years?), until risks shrink a bit. How to play this? Ideas:
- Avoid being too "one-sided"
- take profits when available (to avoid them turning into losses)
- many occasions will happen to accumulate quality names. So don't worry if you miss this or that awesome stock, another chance will come down the road. Just wait for some future Trump tweet ;-)
- get "time on your side": get paid to wait, either via options strategies or holding quality dividend paying stocks.
My take is we get another dip down later, perhaps as low as in Dec 2018 or lower. But until then don't hold your breath. Markets will have wild up & down swings, so be prepared to play both sides.