Summary Equity markets are experiencing an orderly selloff, with investors rotating toward energy and commodities amid rising oil and gas prices. Large-cap growth stocks, especially in semiconductors and software, have become expensive and are now facing strong headwinds. Commodities and blockchain outperformed last week, while developed foreign markets and mid-cap growth stocks saw the steepest declines. I see a 15% correction as healthy, potentially realigning overvalued sectors and providing better entry points for disciplined investors. The selloff in global equities continues, but it has not yet spiraled out of control. The selling is orderly, as investors reposition to lower risk profiles and take advantage of rapidly rising energy prices. I will follow this theme as we move through the charts and tables below. By doing so, we can catch a glimpse of where the big money is flowing to and from where it is coming. S&P 500 Last 4 Weeks The market is weak, but the bull run is still intact. I will probably have to change the scale of this chart next week. author's compilation Zoom Out to 12 Months The two red bars on the right side of this chart grabbed my attention. It’s too early to call this a durable trend, but it is a little unsettling to look at. We humans are always looking for patterns, and this chart offers something for everyone. Is the pattern in the green bars in the middle or in the red bars at either end? You can decide for yourself. author's compilation S&P 500 Drawdowns This chart offers yet another view of the market. I like this chart because it highlights the ‘buy the dip’ behavior of investors ever since we hit the most recent bottom last April. Last week I said, “It’s obvious that the bid is there, but is that bullishness or complacency? We have gone 10 months without so much as a 5% pullback. One day that streak will end.” author's compilation A Look at the Bull Run Since 2022 This chart shows the S&P 500’s 85% run since the bull market began in October 2022. Last week’s 1.6% drop has taken us below the long-term regression line. That’s normal behavior for any bull market, but it has investors asking questions about the sustainability of this bull run. How expensive are we going to get before investors say, “enough is enough.” author's compilation Major Index Performance Last Week Every index I track was down last week. The biggest decline hit the foreign developed markets, which makes sense given the way they have been outperforming lately. Emerging Markets held up best. author's compilation Major Asset Class Performance Two asset classes I track were up last week—commodities and blockchain. Commodities were higher on the continued spike in oil and natural gas prices. author's compilation Equity Sector Performance Energy was the top sector last week, followed by utilities and tech. Everything else was down. author's compilation Factor Returns Investors were selling low-volatility stocks and dividend plays in favor of high-beta names. author's compilation Growth vs. Value Returns Growth and Value were both under pressure last week. Mid-cap growth stocks got the worst of it. author's compilation Commodities Returns Here’s a closer look at commodities. You can see how the spike in the price of oil and gasoline carried the energy complex commodities higher. author's compilation Non-U.S. Markets It was not a good week for investors in India or Brazil. S. Korea and China were flat. author's compilation Equity Group Performance All the groups I track were in the red last week, with Mid-cap value dropping the most. author's compilation The S&P Mag 7+ NVIDIA ( NVDA ) and Alphabet ( GOOGL ) managed small gains last week, while the rest of the Mag 7+ was down. Author's compilation The S&P Top 7+ Share of Gains The S&P 500 is now down 3.1% YTD, but all of that is due to the weakness of the Mag 7 stocks. The other 493 stocks are up, on average. Author's compilation The Ten Best-Performing ETFs Last Week Here we see oil and commodities at the top of the ETF winners list, with Bitcoin sandwiched in between. Author's compilation The Ten Worst-Performing ETFs Last Week The miners—gold, silver, and copper—were all down last week. I see that as simple mean reversion after large gains. Author's compilation The Ten Best-Performing Momentum Stocks Year-to-Date Here are the 10 best-performing stocks in the S&P 1500 on a year-to-date basis. Sandisk ( SNDK ) and Ichor Holdings ( ICHR ) held on to their top spots, despite big drops in both stocks. Ultra Clean Holdings ( UCTT ) has become a darling of the AI semiconductor trade. Author's compilation Final Thoughts It’s funny how so many people I know are all riled up about a market decline of just 5% from its all-time high. That’s because we’ve been programmed to expect the intrepid dip-buyers to step in whenever the market drops as little as 3%. This may be an unpopular belief, but I think a correction of 15% or so would do us all a world of good. It would tend to realign a pricing structure that has gotten quite top-heavy, with Semiconductor and Software companies shining while their suppliers were also benefitting handsomely. Large-cap growth stocks have become wildly expensive, and fewer folks are willing to stick their necks out when the headwinds are so strong. For a minute, gold and silver stole the show with their parabolic rise. Watching the rise of precious metals was like watching the early days of Bitcoin’s journey from under one dollar to over $100,000. Per coin. That’s an epic run for the price of any asset, let alone one that you almost never actually see. That’s because crypto is what James Grant used to call “money of the mind.” Crypto doesn’t have earnings or a cash flow, so investors have to rely on the kindness of strangers to step up and buy their coins for more than they paid for them. Now it seems the only thing holding up is related in some way to the movement we see in the price and availability of oil, gas, and other energy staples. The most expensive stocks have been hit pretty hard. Same for gold & silver—hammered hard but still up big over the last 12 months. And, as you’ve probably noticed, the price of a gallon of gas has gone up so fast that it may move the needle on inflation for March. Lastly, to all the crypto fans who have waited patiently for years for their hopes and dreams to come true, for a while at least, they were in Fat City. Now they wonder if they’ll ever see those lofty prices again. I recently softened my stance on crypto and decided to join the crowd and take a flyer with a few bucks and see what happens. Worst-case scenario is I lose maybe 1 or 2 percent of my portfolio. A blow, for sure, but one that I can easily recover from. To Recap the Last Week’s Action, Investors Were: Selling developed foreign markets and buying Emerging markets Selling mid-caps and buying micro-caps Selling stocks in general and buying commodities Selling financials and buying utilities Selling high beta and buying low volatility Selling gold and silver and buying oil and gas Selling India and buying China Selling META and buying Nvidia
