missing Alphabet (GOOG)

First, I should point out that in my Keeping Score comment yesterday, I neglected to mention Alphabet (formerly known as Google) among the large-cap tech losers in late April.

With that out of the way…

2110+ off the table

A while ago, I wrote in PSI that I thought the S&P 500 could break out to the upside this earnings reporting cycle from the trading range, roughly 1800 – 2110, in which it has been mired for the past two years or so.

I should have kept my thoughts to myself.

It’s now looking like this won’t happen.  The index touched 2110 on April 20th, but bounced back as sharply as if the line were electrified.

This isn’t the end of the world.  Short-term market sentiment, where I’m a living example of how hard it is to assess, isn’t that high on the list of investor priorities.  It comes after:

–asset allocation, i.e., how much stocks, how much bonds…

–bull market or bear market?

–sector structure of stockholdings, and

–individual stock selection.

All my error in judgment means is that the aggressive edge I was thinking of applying to my portfolio for the next few months won’t get put on.

stock market or market of stocks?

The lengthy sideways movement of the S&P brings up a deeper question, though.   Is it still possible to make significant amounts of money in the market if the overall direction of stocks is sideways?

There are markets in the world, Japan and smaller markets in the EU come to mind, where the main forces affecting stocks are macroeconomic   …where stocks tend to move as a group, where there’s little company vs. company differentiation and where there’s scant investor interest in stock picking.  In such markets, sideways movement of the index means sideways movement of just about every stock.  There the short answer to my question is “No!”

The US, luckily for us, is, still, the polar opposite.  Yes, professional active management is waning and Baby Boomers have become more income-oriented.  But the latter are being gradually replaced by Millennials.  And the slower information flow implied by the loss of buy side and sell side professionals suggests that the deck is becoming stacked more favorably for individuals like you and me.

What a sideways market means for us, however, is that for the time being we won’t make money by being more aggressive.  Outperformance will come from doing more careful research and being more selective.