Unraveling the Secrets of the S&P 500
How Just 7 Stocks Fuel a 20% Surge in a New Bull Market
I find it amazing that there are people who say we're in a new bull market because the S&P 500 is up 20% from its low. Those gains have been driven almost entirely by just 7 stocks. The other 493 are flat on the year. This has been one of the most top-heavy market rallies ever and anyone making market calls solely on the S&P 500 is missing a big part of the picture.
How To Interpret the Signals: Within each strategy, there is a risk-on and risk-off investment recommendation, with the risk-off option being the more conservative of the two. When a particular signal indicates that investors should be risk-off, for example, subscribers should consider investing in the risk-off option and avoiding the risk-on option. The opposite, therefore, would be true when the signal flips to risk-on. In each strategy, you’d always be invested in one option or the other.
Here’s how to read the scorecard for each strategy:
Some of the strategies will be more aggressive than others. The “Leverage For The Long Run” strategy, for example, uses the S&P 500 and 2x-leveraged S&P 500. The more conservative “Lumber/Gold Bond” strategy, however, uses intermediate-term Treasuries and the S&P 500. In every case, a risk-off signal indicates that you should be invested in the more conservative of the two options, while a risk-on signal indicates you should be invested in the more aggressive one.
SHORT-TERM SIGNAL: UTILITIES/S&P 500 RATIO
Target Investor: Short-term traders with a higher risk tolerance interested in using an equity momentum strategy to anticipate changes in market risk tolerance.
Current Indicator: Risk-On
Strategy: Beta Rotation - Example: Invest in S&P 500 (SPY) over Utilities (XLU)
SHORT-TERM SIGNAL: LONG DURATION/INTERMEDIATE DURATION TREASURIES RATIO
Target Investor: Short-term traders with a higher risk tolerance who want to use the activity in the U.S. Treasury market to judge overall risk levels.
Current Indicator: Risk-On
Strategy: Tactical Risk Rotation - Example: Invest in S&P 500 (SPY) over Long-Duration Treasuries (VLGSX)
INTERMEDIATE-TERM SIGNAL: LUMBER/GOLD RATIO
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