Dow at all-time-highs, your portfolio down 20% in the last 3 months

If you are somewhat of an active investor, like myself, you’ve probably seen your portfolio take a beating with a Mike Tyson left hook to the chin. First and foremost I’d like to welcome you to the club, there are most likely many other “investors” that are all in the same (sinking) boat attempting to bail water out. Have no fear though, our buckets are large and are arms are strong. What you’ve also probably seen are the headlines where the Dow Jones (god bless him), has been making new highs week after week, so what gives?

As always, I think it’s important to not put too much weight on what the media is saying and the narrative they are pushing. Remember, the Dow consists of 30 of the most stable companies that exist, mainly blue chips, so it would make sense that these companies out-performed during the recent market down-turn.

In the last several months tech has actually been one of the worst performing sectors. The rotation has been into energy, financials, industrials, and materials. Here’s a look at some chart performance.

SPY (blue line) vs Energy

SPY (blue line) vs Financials 

SPY (blue line) vs Materials 

So yes, if you’ve been tech or growth-stock heavy then you’ve been hit hard. The rotation out of tech has not agreed with the valuation many of these stocks were trading at. If your portfolio was well-diversified into some of these sectors that have out-performed then you’ve done okay. The question always begs to ask, where do we head next?

The entire market is focused on inflation and interest rates. Two weeks ago Janet Yellen proposed the Fed may need to increase rates to handle the economy from over-heating. Not even a few hours later she back-stepped on her statements saying the Fed is still very far from raising rates. WTF?

Looking at last week now CPI numbers rose 4.2% YoY vs 3.6% expected. This was the sharpest increase since 2008 and the market did not like that… for a few hours. The market ended up shrugging the CPI news off and bounced HARD on Friday. Is this the dead-cat bounce we’ve been waiting for? Are tech and growth stocks over-sold? Tough to answer, but my opinion is that the worst may just be behind us.