the market is rotating…

…away from secular growth and toward business-cycle sensitives.

Over the past five trading days, including today (I’m writing just after noon), the Russell 2000 is +6.8% and the NASDAQ is up +2.4%.  Half of the relative gain has come so far today.

Unless/until we get bad coronavirus news, I think this movement will continue.

What to do?

The safest thing to do is to stick to your long-term strategy.  Use this as an occasion to adjust holdings, not a cause.  I think the primary reason for the current move from secular growth to cyclical is the huge performance differential that has built up between the two indices, not a fundamental change in trend.  Sort of like the losing team getting a turn at bat.

On the other hand, for someone willing to put in the time and effort, I think this could be a counter-trend rally that goes on for a couple of months before reversing itself.  To pluck a number out of the air, it could mean a 10% relative gain from here for the Russell over NASDAQ.

As for me, about a month ago I bought a small amount of an R2000 ETF and a smaller amount of MAR.  That lost me a tiny amount of performance.  I added to both two weeks ago.  That has worked out better so far. I added more R2000 today, bringing my total shift to just under 10% of my portfolio.

If what I said two paragraphs up turns out to be correct–and if I reverse what I’m doing at the right time–I’ll have gained around 100 basis points in performance.  The figure would be much higher if we could see an end to Trump’s highly damaging economic policies, or if his election opponent weren’t a septuagenarian whose fastball appears to have lost a lot of zip.

is this enough reward to justify taking the risk of being wrong?   Unless you’re involved with your portfolio every day–and I am now that art school is  over (graduation tomorrow)–probably not.  But it keeps my hand in.

 

 

 

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