With stocks sprinting to their best start in 25 years, it seems there is a lot of temptation to either jump on, or bail out when in fact, neither is advisable.
"The hardest thing to do is to stay long entirely," Macke says in the attached video, "People keep pulling money out."
And yet, the Nasdaq is trading at levels not seen in 11 years, having gained more than 125% since the March 2009 lows and all of this happening a month shy of its 3rd anniversary.
Shorter term, traders point to Golden Crosses and to stats like 80% of stocks are now trading above their 50-day moving average, or that last year's worst performing group, the banks, is this year's leader. The Philly Bank Index (^BKX) has popped almost 30% in the past 2 months.
That's all well and good, but since index returns frequently differ from portfolio performance, Macke says, that means "there's a ton of catching up to do."
Whether you agree with that, or are simply in that unfortunate position, it begs the question how - and where - do you chase, and what might you cull?
For me, there's comfort in the fact that that 20% of the S&P 500 is actually down and not just under-performing the benchmark's 7% gain so far this year. But as much as bottom fishing or sector rotation might feel cheaper and offer deals, the momentum is clearly with cyclical sectors like Tech, Industrials, Materials and Discretionary, as well as the Financials.
While I continue to nervously support the banks here, Macke's advice, if you have been fortunate enough to correctly catch the move in financials or home builders, is "Sell them. Get out of there" and go with something, like Tech, that has just burned through 10 years of resistance.
Earnings and the economy are also contributing to investor confidence; and as much as Europe continues to stumble along, their strife is our catalyst as U.S. investors prefer to keep their cash at home.
As Macke sums up, "If you're long a ton of equities, maybe trim some off so you can sleep at night, but don't get out completely and stop trying to talk yourself into being bearish."
What do you think? Is this hot market about to cool down fast or is the risk that it continues to rally higher?
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