A quick note as the first half of 2023 draws to a close, shocking locals with its intensity. For what? ‘Cause hardly anyone saw this rally coming.1
At this time, the indices are significantly higher than on January 1, 2023: the NASDAQ 100 is up >38%, the S&P 500 is up around 15.5% and the Russell 2000 small cap index is up up nearly 7%. Those numbers would make for a respectable year much less than half that time.
Consider these gains in light of yesterday’s discussion of belief systems and thought processesOnly this time, instead of referring to anti-vaxxers and insurgents, think about everything you’ve heard from fund managers, economists, strategists and various pundits who have freely expressed their opinion on the evolution of this market in 2023.
Why were they so sure they knew what was going to happen? What were their sources? Their process? Have they considered the possibility that they are wrong?
Most important, did you rely on these people to inform your investment views? With their recent track record fresh in your mind, will you still rely on them in the future?
Having missed the huge rally, this same group of people are now busy running around with their hair on fire, shouting how unsustainable this decision is – they seem to think the shares are too expensive, although one has to wonder if they would feel the same way if they participated in the rally, rather than shouting at it from the sidelines.
Perhaps for some context, we could consider these indices in a broader time frame than YTD: for example, looking back 2 years shows us that most of these gains since the start of 2023 are simply a resumption of the 2022 decline as rates rose and fears of an earnings slump surfaced.
As shown in the 2-year chart above, the NASDAQ 100 is up >4%, the S&P 500 is up around 3.4%, and the Russell 2000 is down 18%; these are hardly reasons to rejoice. And yet, that’s exactly what the last 2 years in the US stock markets have brought you.
A rally from the lows looks very different in the context of a resumption of a drawdown.
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Enjoy the holiday weekend and stay safe out there…
Previously:
What do you think? For what? (June 29, 2023)
Groped for a bottom (October 14, 2022)
nobody knows anything (May 5, 2016)
too many bears (May 3, 2022)
surrender manual (May 19, 2022)
__________
1. Several technicians have been hammering the table since the June and October lows, including Ed Yardeni, Ralph Acampora and JC Parets.
