DataTrek Co-founder Nick Colas’ latest piece for Bloomberg Prophets on what we learned from Q1’s shifting market narratives and what it means for Q2 and the rest of the year:
“There is much more to the first-quarter drop in the S&P 500 Index than its modest 1.22 percent decline suggests. Everything from changing narratives in technology stocks to higher asset price correlations reveals a watershed moment for a bull market that has been underway since 2009. That was on display Monday, with the benchmark posting its worst April start since 1929.
Below is a list of what the first quarter taught us about current market dynamics, and how they may inform investor psychology going forward.
1. Too many investors are still overweight technology shares. Large-capitalization U.S. tech stocks were largely a one-way trade from 2010 through 2017, consistently outperforming with low overall market volatility. As a result, a lot of “lazy long” money flowed into the sector. The price action in large-cap tech shares the last few weeks underscores how many weak hands still over-own the sector. Tech insiders have been warning about data privacy and insular managements for several years, yet Facebook’s recent challenges
clipped the stock price by almost 20 percent and hurt overall group performance….”
You can read the rest here on Bloomberg.
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