The Weekly Update 10/20/2023
Minus seven companies, the valuations are down!
As we started this week of October 16, 2023, the valuation of Corporate America, as measured by the S&P 500, is up +12.65% year to date (YTD).
Is it really!
Yes, but no! Yes, it is up +12.65%, however if you remove the top seven technology stocks, the index is close to -0.87%! (source: The S&P 500 equal weight S&P 500, or (RSP)!
Like many times in the past, if you own just the big tech companies you do well when they are up and not too well when they are down. That said, on prior occurrences like this one the big tech companies have tended to drag the other 493 companies up in value, over time, of course.
If this odd situation turns out like three others before it, we could be sitting on a gold mine. In the chart below, hedge fund selling is measured back to 2015. The current level of selling is greater than the “Brexit” in 2016, the “China Tariff War” in 2018 and the “Covid Global Shutdown” in 2020.
Key point: As you observe the chart below pay special attention to what happened right after the prior gold star lows!
You are most likely observing “Rocket Fuel” for the next launch up in valuations. As always, no one including me, knows the future. Yet when you have clues as to what could be right around the corner, like this one, it pays to pay attention to what could come next.
I’m interested in your thoughts, comments, and observations. Feel welcome to call, email, or stop by the office and say Hi.
James O. Lunney, CFP®
CERTIFIED FINANCIAL PLANNER™ Professional
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.