Stocks are off to the races to kick off the trading week. The action today could set us up for another round of new all-time highs.
Source: Yahoo Finance
That’s quite astonishing considering everything the markets have endured over the past 12 months.
Just like things were prepandemic, “new record highs” is a phrase we’re going to hear often. In fact, the S&P 500 has hit new highs (according to daily closing prices) four times in March alone. Even more, the S&P 500 is on pace to notch its fifth record high close of the month this week.
Unlike the prepandemic rally, however, it’s not just growth stocks leading the way. Right now we’re seeing a much broader spread of stocks performing well. For example, oil-related stocks are booming. In contrast, some of the hottest prepandemic tech plays, stocks like Apple Inc. and Amazon, are just coming out of correction territory.
Now, by nature I lean toward higher-risk growth stories, like you find with many tech stocks. I look at March’s tech sell-off as a buying opportunity (I’ll get into why further down the page). But at the same time, I am not silly enough to try to fight the greater market trends taking hold.
Simultaneously, I’m also rotating some funds into value plays.
Select value stocks will likely continue to perform well against the greater market in the short term as choppy conditions pervade and fears of rising bond yields drag on growth sectors.
Staying ahead of this trend can offer strong returns while the market continues to play its game of two steps forward, one step back.
You’ll want to reallocate some of your portfolio to these sectors, especially if you’re like me and have spent most of your time investing in growth recently.
But Don’t Sleep on Tech
I was on a call with a colleague last Friday talking about the markets and rotation, growth versus value stocks, and other related items.
At one point, we were looking at the 10-year U.S. Treasury note. As I type, the 10-year note is sitting just below a 1.70% yield — a higher number than the 1.5% that set off the tech correction a few weeks ago.
Heck, for 1.7% returns, my money is better off in a high-yield savings account than in bonds.
And in thinking more about it, why do I want 2% in a bull market?
Even if the cost of doing business rises for the big tech names, if they can still give me 10%–20% or more on average annually, I’d much rather take that than lock myself into the fragile bond market.
Moreover, many big-name tech stocks should be treated much more like staple stocks. Think about it.
You probably have more silicon in your house than cleaning products. So I ask: Are computer chips or Clorox products more of a consumer staple?
We could go back and forth for days on the minutiae of the argument, but my point is that in a tech-fueled world, we need to at least consider some tech stocks are more like hybrid tech stables.
Just take a look…
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Some big names in tech are starting to pay dividends, a classic characteristic of a staple stock. Microsoft (NASDAQ: MSFT), for example, pays a 1.00% dividend at $2.24 per share.
And taking that easy money on top of MSFT’s near 75% return over the past 365 days counts as an incredible win in the stock market no matter how you slice it.
And if you compare that type of low-risk gain opportunity with the 1.7% from the bond market, it’s clear to both Main Street and Wall Street investors that equities are where you want to be.
To Summarize
As we deal with a choppy market, it’s important to keep two things in mind. For starters, a balanced portfolio will be the key to outperforming the herd this year.
And remember — now’s not the time to bail on big tech.
The importance of these companies as staples in our everyday lives is well understated.
This should transition into some great gains over both the long haul and the short term.
That includes the over 500% gain my colleague Christian DeHaemer offered readers by capitalizing on one singular technology…
A technology that makes all the other headline-grabbing tech stories — like 5G, new-age medical devices, AR/VR, driverless cars, and more — possible.
To your wealth, Sean McCloskey After spending 10 years in the consumer tech reporting and educational publishing industries, Sean has since redevoted himself to one of his original passions: identifying and cashing in on the most lucrative opportunities the market has to offer. As the former managing editor of multiple investment newsletters, he's covered virtually every sector of the market, ranging from energy and tech to gold and cannabis. Over the years, Sean has offered his followers the chance to score numerous triple-digit gains, and today he continues his mission to deliver followers the best chance to score big wins on Wall Street and beyond as an editor for Energy and Capital.
Editor, Energy and Capital
@TheRL_McCloskey on Twitter
