The Three Pillars for Stocks
There might also be as much uncertainty for tech stocks today as there was at the start of March.
However, let’s look at the big picture almost a week after we hit the 1-year anniversary of the market’s bottom. Three pillars remain in motion as a strong backdrop for stocks:
We could see some more volatility on tap this week as the market continues to figure itself out.
1. Suez Canal- There’s been a gigantic tanker blocking arguably one of the most crucial waterways for global trade for the last 6 days. There are indications that the tanker may be on the way to being freed. But the sooner this happens, the better. The Suez Cana controls about 10% of global trade, so you can only imagine the hundreds of billions of dollars bleeding per day the more this drags on.
With that said, to sum it up:
The market has to figure itself out. More volatility is likely, and we could experience more muted gains than what we’ve known over the last year. Inflation and interest-rate worries should be the primary tailwind. However, a decline above ~20%, leading to a bear market, appears unlikely to happen any time soon.
Russell 2000- Time to Pounce?
I kicked myself for not calling BUY on the Russell after seeing a minor downturn during the second half of February. I wasn’t going to make that mistake again.
Fast forward to Tuesday (Mar. 23). The Russell 2000 saw its worst day since February 25, dropped below its 50-day, and I switched the call to a BUY.
Aggressive stimulus, friendly policies, and a reopening world bode well for small-caps in 2021. I think this is something you have to consider for the Russell 2000 and maybe overpay for.
For more of my thoughts on the market, such as tech, inflation fears, and why I love emerging market opportunities, sign up for my premium analysis today.
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Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care
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