E Market Briefing For Thursday, May 6

Money manager behavior for a number of months as FANG love affairs for sure dominated the 'tape'. They accounted for perhaps 80-90% of both price-weighted and volume gains/activity), and more recently (and necessary as we oft pointed-out) we got some rotation into Oils and Industrial stocks that tend, in the post-pandemic world, to benefit from relative values vs. insane excess.

The concern we've had (and it's somewhat alleviated by rotating corrections it seems in at least some 'grand dames') however is generally not dramatic to a degree normally seen in meaningful S&P corrections. That reflects reluctance to abandon the expensive (mostly tech) stocks that benefited during heaviest COVID restrictions, and even Server maker demand due to crypto 'mining', not merely chip issues in the automotive sector (SPX).

Because of an essentially constant liquidity influx and lack of return elsewhere you had several managers abandon age-old (fiduciary?) balancing guidelines and just blindly mimic the behavior of their peers. That means many remain in those stocks, given mild adjustments, and a lot of things have to go right for a truly optimistic 'fundamental' argument, given out-of-the-world valuation levels otherwise, even after minor pullbacks.

This whole bifurcated situation, as relates to the very expensive stocks, tends to remind me of a 'contrast' I used to explain this behavioral psychology. Our investing behaviors should be, and generally are for the majority, presumed to be vastly different from our consumer behaviors. As consumers of goods, we seek discounts on products we want and avoid products seen as too pricey.

On the other hand, as investors, many seem to even prefer paying top dollar for stocks (led on by cheerleaders at high levels), and then they crater and the same enthusiasts avoid them like the plague when at a deep discount. If a top of the line Samsung TV is on-sale (and I need one), I'll go shopping. I won't buy it at full-price. With stocks, people like them at full price and not when low (but I get part of that, the TV will never go about 'list', a stock can, but that's of course who one gets swept-up in the 'greater fool theory' of stock chasing).  

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