This Chart Proves the Rebound Isn’t Sustainable

Welcome back to Bauman Daily! I hope you had a safe and enjoyable Memorial Day weekend.

In yesterday’s Your Money Matters video, Clint Lee and I took a hard look at the composition of the recent stock market rebound … and it’s not a pretty picture.

Our first conclusion was that the rally off March lows is entirely driven by mega-cap technology and pharmaceutical companies.

Right now, the top five firms — 1% of the index — comprise 20% of the market capitalization of the S&P 500 Index.

By contrast, the rest of the stock market continues to stagnate.

In the following chart, the blue area represents the S&P 500 Index on a capitalization-weighted basis, where the biggest firms contribute more to the index value. The red line represents an equal-weighted version of the S&P 500 Index, where all firms are represented equally:

The divergence between the two is the greatest it’s been in the last decade.

In other words, this rebound isn’t broad-based. That means it’s unsustainable.

Eventually even the top tech firms will reach valuations that will make investors shy.

At that point, the big tech stocks will begin to trade sideways and the rest of the market will drag the overall index down.

But there’s a silver lining in this for smart investors … and I’ll explain it today.

Time for a Course Change

In the long term, one way to make money in the stock market is to buy what everybody else is selling. But it’s critical to buy at the right time … and that time is now.

That brings us to the second conclusion Clint and I reached in yesterday’s video.

There’s been a dramatic shift in fund flows away from investments in broad sector indexes — like the SPDR S&P 500 ETF Trust (NYSE: SPY) — and toward sector-specific investments.

For example, over the last four weeks, an exchange-traded fund (ETF) tracking the building and construction sector has broken away from the S&P 500 Index, outperforming it by more than 10%:

Turn Your Images On

Fund managers all over the world see the same thing Clint and I do: the time to make money by riding along with the market is at an end.

It’s time for a different strategy.

The Going Gets Tough

You’ve probably seen articles talking about the upsurge in passive investing over the last decade.

“Passive” investing means putting your money into ETFs and other investments that cover groups of stocks. Instead of trying to figure out which companies will provide the best returns in an index or sector, you invest in all of them and go along for the ride.

This passive strategy became popular because no matter where you put your money, you were likely to see gains. Practically every portion of the stock market was growing in value.

Not anymore. To make money nowadays, you need to do your homework. The chart I showed you above proves it.

Imagine the stock market as a squadron of jets.

A few of them have powerful engines and can climb faster than the others. But all of them have a maximum altitude. They can’t fly higher than that because there isn’t enough oxygen to fuel their engines.

In the recent rebound, a few powerful firms have managed to get close to the maximum altitude. It’s been a great ride. But their future possible gains are diminishing.

Meanwhile, dozens of other firms are still climbing. They have a long way to go before they reach that limit.

But our airborne stocks are flying into combat. The COVID-19 crisis is like a flak battery pummeling the economy. Some of the stocks still climbing will get hit and crash, like JCPenney, Neiman Marcus and others that have declared bankruptcy.

The trick to profits, then, is to identify the stocks still climbing that have the best pilots … The ones that can avoid COVID-19 flak.

Three Ways to Reach the Skies

The stock market as we’ve known it is dead.

No longer can we prosper by going along for the ride. To uncover gains in this market, you need to find the companies that have the best chance of making it through the flak.

To do that, I start with three principles.

  • First, I look for essential sectors that will survive no matter what. Society can do without retail clothing stores, but it can’t exist without places to live. That’s why I like housing over retail (for example).
  • Second, flying through the flak thrown up by COVID-19 is an enormous drain on fuel. Companies trying to maneuver through lockdowns, workforce disruptions, transportation issues and other challenges must spend extra cash just to do their normal business. So I look for companies that have extra fuel, in the form of strong balance sheets, with plenty of cash and low debt.
  • Third, even among those that meet the first two criteria, some are better managed than others. This is why looking at past performance is so important. All things equal, the company that has achieved faster earnings growth and higher profit margins is the one to pick over its competitors. It’s going to reach its peak value faster than the others.

During the long bull market after the financial crisis, it was possible to do reasonably well in the stock market without a helping hand.

Those days are over. The helping hand you need is right here … in The Bauman Letter.

Kind regards,

Ted Bauman Signature

Ted Bauman

Editor, The Bauman Letter

Previous Post
Next Post

Comments

storno brzinol

I’m commenting to let you be aware of what a extraordinary experience my wife’s princess went through viewing the blog. She figured out so many issues, with the inclusion of how it is like to have a great giving nature to get many people completely understand various impossible things. You truly exceeded our own expectations. Thank you for producing those helpful, trustworthy, informative not to mention unique tips on the topic to Lizeth.

saraykapi.com

Awesome things here. I’m very glad to peer your post. Thanks a lot and I am having a look
ahead to contact you. Will you please drop
me a e-mail?

My page … saraykapi.com

Ekefmy

Sdgonc – ed pills Plfuoj

Essential Nutrition Keto

Neat blog! Is your theme custom made or did you download it from somewhere?
A theme like yours with a few simple adjustements would really make my blog shine.
Please let me know where you got your design. Thank you

My website … Essential Nutrition Keto

forum.mesign.com

I have read so many articles or reviews regarding the blogger lovers but this post is in fact a good article, keep it
up.

My site :: forum.mesign.com

https://bbs.yunweishidai.com/forum.php?mod=viewthread&tid=1387987

Very quickly this website will be famous among all blogging and
site-building visitors, due to it’s nice articles

My site :: https://bbs.yunweishidai.com/forum.php?mod=viewthread&tid=1387987

Skyline X Drone

Wow! Thank you! I permanently wanted to write on my website something like that.

Can I include a portion of your post to my site?

Here is my web site: Skyline X Drone

Testol Max

certainly like your web-site however you need to take a look
at the spelling on several of your posts. A number of them are rife with spelling problems
and I to find it very troublesome to inform the truth nevertheless I will surely come back again.

Feel free to visit my web-site :: Testol Max

Claritox Pro

I just couldn’t leave your web site before suggesting that I really enjoyed the standard info an individual provide in your guests?
Is going to be again often to investigate cross-check new posts

Here is my blog: Claritox Pro

BTC Prestige App

I don’t even know how I ended up here, but I thought this post was good.
I do not know who you are but certainly you are going to a famous blogger if you are not
already 😉 Cheers!

Check out my web blog BTC Prestige App

Quit Smoking Gummies Review

Very energetic post, I loved that bit. Will there be a part 2?

Visit my web blog :: Quit Smoking Gummies Review

mpc-install.com

Keep on writing, great job!

my web blog; mpc-install.com

Bztktd

viagra with dapoxetine – priligy price legitimate online pharmacy uk

New Flow XL

This internet site is my breathing in, very good style and Perfect written content.

my blog … New Flow XL

Mpgsrc

ed pills walmart – ed pills walmart ed meds

Naked CBD Gummies Review

I loved as much as you’ll receive carried out right here.
The sketch is attractive, your authored subject matter stylish.
nonetheless, you command get bought an edginess over that you wish be
delivering the following. unwell unquestionably come further formerly again as exactly the same nearly a lot often inside case you shield this increase.

my blog post: Naked CBD Gummies Review

dysonvacuumdc24.com

Great post. I used to be checking constantly this weblog and I am impressed!
Extremely useful information specifically the final section :
) I handle such information a lot. I used to be seeking this certain info for a very long time.
Thanks and good luck.

Here is my web site :: dysonvacuumdc24.com

Dcklht

prednisone 50 mg price in india – buy prednisone online no script prednisone 1 mg price

Alpha Hotrod Reviews

Thanks for sharing such a good thought, paragraph is pleasant, thats why i have read it completely

Also visit my page :: Alpha Hotrod Reviews

mpc-install.com

You can definitely see your skills in the paintings you write.
The arena hopes for even more passionate writers such as you who are not
afraid to say how they believe. Always go after your heart.

Here is my page :: mpc-install.com

Bfpaiz

provigil 100 mg – modafinil online provigil for adhd

https://forum.mutecolossus.com/index.php?action=profile;u=4999

Whoah this weblog is excellent i like studying
your posts. Stay up the great paintings! You already know, a lot of
persons are searching around for this info, you can aid
them greatly.

Also visit my webpage; https://forum.mutecolossus.com/index.php?action=profile;u=4999

Dmbcio

accutane 30 mg price – accutane online singapore rx costs accutane

Naked CBD Gummies Reviews

I?m impressed, I have to admit. Seldom do I encounter a blog that?s both equally
educative and entertaining, and without a doubt, you have hit the nail on the head.

The problem is something not enough people are speaking intelligently about.

Now i’m very happy I came across this during my hunt for
something concerning this.

Also visit my webpage: Naked CBD Gummies Reviews

Jbwjkx

amoxicillin 500mg capsules for sale – price of amoxicillin without insurance amoxicilin brand name

Camcvu

penny vardenafil generic – vardenafil vs viagra bruno vardenafil generic

Lmhkby

ivermectin 0.5 – ivermectin 200mg ivermectin 50 mg

Repxxu

stromectol 6mg online – ivermectin 400 mg brands stromectol tablets

Kkmfmq

accutane tablets price – average price of accutane isotretinoin generic

Sbsykw

lyrica 100 mg pill – lyricapt canadian pharmacy legit

Qolgfh

amoxicillin 500 mg for sale in canada today – amoxil 250 buy amoxicilin online

Dr Romain Perez implants dentaires Paris

I see something truly interesting about your blog so I saved to my bookmarks.

Xjycfn

where can you buy sildenafil – cheap viagra online australia rx pharmacy generic viagra

Wmlpde

where to buy cialis in canada – cialis online 5 mg cialis tablets 5mg price

Evjmzk

price of ivermectin – ivermectin cost in usa stromectol prices

Hosubw

prednisone 500 mg tablet – prednisone cream otc prednisone 5mg pills

Cool Blast Portable AC

Hmm is anyone else encountering problems with the pictures on this blog
loading? I’m trying to determine if its a problem on my end
or if it’s the blog. Any feedback would be greatly appreciated.

Feel free to visit my webpage: Cool Blast Portable AC

Uljrqo

provigil schedule – modapls buy provigil

Lezbko

generic zithromax 250mg – what is azithromycin used to treat order zithromax online canada

Ywosxd

lasix 500 mg – furosemide 40 mg cheap buy furosemide 20 mg online

alexander95f.webgarden.at

Hi there! I could have sworn I’ve been to this blog before but after reading through some of the post I realized it’s new to me.
Anyways, I’m definitely happy I found it and I’ll be book-marking and checking back
frequently!

Here is my blog post; alexander95f.webgarden.at

Rdimqm

buy clomiphene – clomiphene online buy clomiphene online

ACV Rx Side Effects

Loving the info on this internet site, you have done outstanding job on the content.

My page – ACV Rx Side Effects

Mudttq

viagra online india price – cost of viagra prescription paypal viagra australia

http://clubriders.men/

Oh my goodness! Amazing article dude! Thank you so much,
However I am going through troubles with your RSS. I don?t know why I am unable to join it.
Is there anybody else getting identical RSS issues? Anybody who knows the answer will you kindly
respond? Thanks!!

My blog – http://clubriders.men/

Apnobj

cialis coupon – tadalafil generic cialis 20mg online pharmacy viagra

Remdli

ivermectin 200mg – ivermectin brand name ivermectin pills for humans

Qhuohh

slot machines – online casinos usa hollywood casino online real money

Jbujrv

best ed pill for diabetics – ed medication online can i buy ed pills over the counter

Oracle Leaf Gold CBD Review

Excellent post. I was checking constantly this blog and I’m impressed!
Very useful information particularly the last
part 🙂 I care for such information much. I was looking for this particular info for a very long time.
Thank you and good luck.

Also visit my web blog :: Oracle Leaf Gold CBD Review

Urpuen

prednisone 54760 – discount deltasone prednisone 5 mg buy online

Tvurue

100mg sildenafil generic – viagra brand name online viagra online from mexico

Qxqziq

tadalafil canada – Brand cialis cialis 5mg cost

Pqckba

stromectol tablets 3 mg – buy stromectol uk ivermectin price

Vqecyw

best ed pills on the market – best ed treatment pills which high blood pressure medication causes erectile dysfunction

The Skin Company

As a Newbie, I am continuously browsing online for articles
that can be of assistance to me. Thank you

Here is my homepage – The Skin Company

Enoxgv

ventolin over the counter – buy Albuterol ventolin purchase

Olaoup

cytotec 800 – cytotec over the counter cytotec for iud insertion

Khtzbn

200 mg doxycycline – how much is doxycycline cost doxycycline 50 mg cost

Dtygli

cheap neurontin online – neurontin buy from canada price of levothyroxine 75 mcg

Pfnrrl

best over the counter female viagra – buy viagra generic canada

t.co

Wow that was strange. I just wrote an extremely long comment but after I clicked
submit my comment didn’t show up. Grrrr… well I’m not writing all that over again. Anyways, just wanted to say
excellent blog!

Imarais Beauty Review

I am actually happy to read this weblog posts which contains
lots of valuable facts, thanks for providing these kinds of data.

Also visit my blog – Imarais Beauty Review

Zdnucv

vardenafil buy online – levitra buy vardenafil online uk

quest bars why

Hurrah, that’s what I was searching for, what a information! present here
at this website, thanks admin of this web page.

when asmr

Hello Dear, are you truly visiting this web site regularly,
if so afterward you will absolutely get good experience.

Egjmfs

ivermectin 1%cream – stromectol where to buy ivermectin 50 mg

or scoliosis surgery

I visit each day a few blogs and websites to read content, but this blog gives feature
based articles.

Rlzudd

prednisone 50 mg – prednisone 20mg cheap prednisone 40 mg tablet

Extreme Muscle XXL

I am glad to be a visitor of this complete web site, thanks for this rare info!

Feel free to visit my web-site; Extreme Muscle XXL

my asmr

Heya i’m for the first time here. I found this board and I find
It really useful & it helped me out much. I hope to give something back and help others
like you aided me.

Summer Valley CBD Review

I must convey my admiration for your kindness in support of all those that have the need for assistance with that
concept. Your personal dedication to getting the solution across has
been especially beneficial and have helped most people
just like me to achieve their goals. The informative
report means this much to me and extremely more to my mates.
Warm regards; from all of us.

my site: Summer Valley CBD Review

Twtxrb

accutane online order – accutane tablets buy online generic accutane online pharmacy

asmr for

Thanks for your marvelous posting! I definitely enjoyed reading it, you might be a great
author.I will be sure to bookmark your blog and will often come back later in life.
I want to encourage that you continue your great posts,
have a nice afternoon!

asmr an

hello!,I love your writing so a lot! percentage we communicate more approximately
your post on AOL? I require an expert on this area to resolve my problem.
May be that’s you! Having a look ahead to look you.

but scoliosis surgery

Awesome! Its genuinely awesome post, I have got much clear idea regarding from this article.

order lasix

lasix no prescription furosemide for sale vot Glulp

furosemid 20 mg

rx furosemide buy lasix without prescription vot Glulp

buy lasix online without prescription

lasix 40 mg over the counter lasix at walmart vot Glulp

furosemide 12.5 mg walmart

lasix online no prescription lasix online vot Glulp

https://worldwidehandicappers.com/smf/index.php?action=profile;u=5939

Very clear website, appreciate it for this post.

Here is my web blog :: https://worldwidehandicappers.com/smf/index.php?action=profile;u=5939

http://bitly.com

My developer is trying to persuade me to move to .net
from PHP. I have always disliked the idea because of the expenses.
But he’s tryiong none the less. I’ve been using Movable-type on various websites
for about a year and am nervous about switching to another platform.
I have heard fantastic things about blogengine.net. Is
there a way I can import all my wordpress posts
into it? Any help would be greatly appreciated! cheap
flights http://1704milesapart.tumblr.com/ cheap flights

quest bars it

each time i used to read smaller articles that as well clear their motive, and that is also happening with this post
which I am reading here. quest bars http://bitly.com/3jZgEA2 quest bars

Herbal Pro Relief CBD Oil

Some genuinely interesting points you have written.Aided me a lot, just
what I was searching for :D.

my site :: Herbal Pro Relief CBD Oil

http://app.gumroad.com

Hi would you mind stating which blog platform you’re using?
I’m planning to start my own blog soon but I’m having a hard time making a decision between BlogEngine/Wordpress/B2evolution and
Drupal. The reason I ask is because your design and style seems different then most blogs and
I’m looking for something completely unique. P.S My apologies for getting off-topic but I had to ask!
asmr https://app.gumroad.com/asmr2021/p/best-asmr-online asmr

buy furosemide tablets

lasix 20 mg tablet price cost of lasix vot Glulp

www.iherb.com

I am regular visitor, how are you everybody? This paragraph posted at this website is actually pleasant.
quest bars https://www.iherb.com/search?kw=quest%20bars quest bars

Hgrssn

buy oral ivermectin – stromectol without prescription ivermectin for humans walmart

bitly.com

If some one wishes to be updated with latest technologies after that he must be pay a visit this site
and be up to date daily. scoliosis surgery https://0401mm.tumblr.com/ scoliosis surgery

bit.ly

Hello, its pleasant piece of writing about media print,
we all understand media is a wonderful source of information.
ps4 https://bit.ly/3nkdKIi ps4 games

coub.com

Right here is the right blog for everyone who would like
to find out about this topic. You realize a whole lot its almost tough to argue with you (not
that I personally will need to…HaHa). You certainly
put a brand new spin on a subject which has been written about
for ages. Wonderful stuff, just great! scoliosis surgery https://coub.com/stories/962966-scoliosis-surgery scoliosis surgery

Dufxxv

prednisone 50 mg – buy prednisone 40mg online prednisone 5mg tablets price

cost of ivermectin lotion

stromectol generic name stromectol 3mg cost

Libido Build Rx Reviews

Hey there! I could have sworn I’ve been to this
website before but after checking through some of the post I realized it’s new to me.
Nonetheless, I’m definitely glad I found it and I’ll be book-marking and checking
back frequently!

Stop by my webpage :: Libido Build Rx Reviews

buy stromectol

ivermectin uk coronavirus buy stromectol online uk

Keto Rapid Trim Ingredients

Greetings from Florida! I’m bored to death at work so I decided to browse your site on my iphone during lunch
break. I enjoy the information you present here and can’t wait
to take a look when I get home. I’m shocked at how quick
your blog loaded on my phone .. I’m not even using WIFI,
just 3G .. Anyhow, excellent site!

Check out my homepage – Keto Rapid Trim Ingredients

Dvhwje

generic doxycycline – doxycycline 100mg price in south africa prednisolone 4mg cost in india

Leave a Reply

Your email address will not be published.