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The finish line is in sight for the first quarter, and it served as a humble reminder for many that volatility lurks around every corner in this market.

Does that mean there weren’t any opportunities on the long-side of this market? Absolutely not. In fact, I think we have new themes that are really going to stick going forward.

But as I sit here and take stock of what happened in this first quarter, it’s become clear to me that we’ve entered a new paradigm for markets. Those that fail to adapt to this new environment will be punished accordingly. 

Here’s what I mean… 

The Trend is Your Friend, Until the Trend Ends

First and foremost, let me start off by saying that I am a trend trader. In other words, 9/10 of my trades are going to be in the direction of the underlying trend.

And for years, the trend for the stock market was for the U.S. to outperform. But that didn’t pan out at all in the first quarter. In fact, it was the opposite. The U.S. is setting up for a negative quarter as other markets around the world in Europe and China are on pace to finish up double-digits.

For years, those of us in the U.S. were spoiled by all the action taking place domestically. For those that are forever in search of outperformance (like us), it’s absolutely critical that we not fall into the trap that the U.S. is the only market that matters.

Does the U.S. market matter more than most? Absolutely. But it’s not the only game in town. Remember that.

Ask yourself this question: What do you think a sustained period of outperformance by international stocks over U.S. stocks would do for the market mood here domestically?

I think it’s going to frustrate a significant number of market participants. They’ll be in denial at first, and then once they capitulate and finally start moving money abroad, that will be around the time where the U.S. can start its comeback.

Always remember: Once the crowd catches onto a market trend, the “easy money” phase is over. We’re just not there yet on the international stage.

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