Wee Willie Keeler and today’s US stock market

William Henry Keeler was a Hall of Fame baseball player whose career spanned the late 19th and early 20th century. His lifetime batting average was .341. To the degree he’s remembered today, it’s because of his motto, “Keep your eye on the ball and hit ’em where they ain’t.”

I think this saying has particular relevance for today’s stock market.

–I’ve begun to see advertisements for “AI-assisted” short-term trading advice. I’ve never been a fan of day trading. It’s virtue, if that’s the right word, is that it’s easy to do (extrapolating from the past few days’ price/volume action to what will happen today). That’s also the bad news–algorithms can do this better than humans and, unless the AI services systematically subtract value, the competition has just gotten stiffer. So there’s lots of “they” in this arena.

There may be stocks that you’ve followed for years and know the rhythms of its trading well enough to have an edge. That’s fine. But for myself anyway, it’s much better to take a longer view, where the competition is less intense–and the chances of having insights others don’t have are much, much greater.

–IT and Communication Services, the two tech sectors in the US stock market, comprise about 40% of the market cap of the S&P 500. The other 60% is, by and large, tied to the economic fortunes of the US, Europe and China–all areas with aging populations, only faint GDP growth pulses and significant right-wing, deeply anti-growth politics that lower the odds of stronger GDP advances.

At first blush, concept says to favor the first group, because of much stronger secular growth trends. But I don’t think macroeconomics is the most important stock market story today. For example, Consumer Discretionary, one of my favorite sectors, may be a net neutral. But for every Bed, Bath and Beyond that dies of old age, there’s someone else who’s a beneficiary. Remote work is bad for big-city office properties, but a boon not only for their suburbs but also for more distant areas that haven’t had much going on for decades. If we look at the best ytd performers in the S&P, they include the cruise lines, GE (!?!), Chipotle and Align, a dental equipment company.

I think the ex-tech area is a great place to look, because I believe professionals are by-and-large focused on trying to get their tech strategy right. If we were pros, easier to have one or two tech bets, use an index to get the overall tech weighting to the market (thereby neutralizing it–you won’t gain relative performance, but you won’t lose it, either–and look for bargains elsewhere. That’s what I’m doing.

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