It’s 2021, so the market rotations continue.
But we see a foundation for growth ahead.
Sector rotations have been a definite theme this year. What’s up one week is down the next. When a group shines, it falters soon thereafter, and vice versa.
That continued this week. After a flurry of Monday buys (131 Big Money buy signals vs. 51 Big Money sell signals), we saw chunky selling on Tuesday (130 sell signals vs. 32 buy signals), with the S&P 500 Index and NASDAQ Composite Index dropping more than 2% each, respectively.
Yesterday, markets recovered some. Still, the historically down month of September continues to squeeze investors. The S&P 500 Index is on pace for its worst month since October 2020.
The recent, accelerated Big Money selling was prominent in large technology stocks. The NASDAQ 100 (Invesco QQQ Trust) is currently down 3.76% week-to-date.
With all this negative action, why do we still see a foundation for growth ahead?
Well, the Big Money has also been buying, specifically small-cap, high quality growth stocks. The Russell 2000 Index (IWM iShares Russell 2000 ETF) was up more than 2% on Monday. To us, that indicates bullishness in a full economic recovery, likely fueled by the news of COVID-19 vaccination booster shot availability and a vaccine for children just around the corner.
Consider this another 2021 rotation. Only this time it’s from large-cap, stay-at-home stocks to small-cap equities and a broader economic recovery.
Why is this important?
Let’s dive into the data.
Big Money Index In 2021
Let’s zero-in on our trusty Big Money Index. It tracks the inflows and outflows of Big Money.
For many months, money flew into big stocks. This trend floated the S&P 500 and NASDAQ, making them rise even as the Big Money Index (BMI) took a downward trajectory:
However, when compared to the Russell 2000, there’s a much stronger correlation with the BMI. Both have been sideways since February 2021:
When we look at what Big Money is doing, it can foretell what may happen with markets in the future. Large cap tech stocks were recently sold off. And now, under the surface, Big Money is pouring money into high quality growth stocks of the small-cap variety.
We see that as a foundation for growth ahead.
We view the BMI as forming a base for growth heading into the last quarter of the year, which is historically one of the best times for stocks. A day or two of selling doesn’t change the longer-term growth narrative, which is about as bullish as it can get.
Simply put, we think the juice is about to flow.
Big Money Signals A Foundation for Growth Ahead
Obviously, we believe in Big Money’s power to move markets. We’ve built an entire world around this philosophy!
Generally, Big Money gravitates to quality. That means it clings to companies with strong track records and even stronger growth prospects. Over the years, this includes names like Amazon (AMZN), Apple (AAPL), and Facebook (FB).
It’s like the market’s “greatest hits” – only the juiciest stocks make the cut. That’s because they’re the Big Money outliers that can generate superior returns.
For instance, the MAP 50 from May this year so far has easily beat the S&P 500 (SPY ETF):
Expand the point of view to when we first began making this report and you’ll see monster outperformance. Those 50 stocks have returned +88% vs a very strong +60% gain for the S&P 500 (SPY):
But I don’t want to stop there! Here’s how it would look if we released the MAP 50 back in April of 2017 (platinum members can do all of this in our portal):
Keep in mind we can’t guarantee what’ll happen in the future. But, just looking above shows the power of Big Money.
Much of this performance is due to Big Money movement on high quality growth stocks. The ability to identify these movements and stocks can be the differentiator for outsized performance…or what we like to call JUICE!
And these performance figures include nasty drawdowns too. And from our vantage point, why change our tune? That’s why we see a foundation for growth ahead.
Here’s the bottom line: Finding growth outliers and investing in them over the long term is the way our system wins, and we believe the upcoming quarter can be setting up for gains ahead.
Sure, there’ll be further rotations. But eventually there’s a migration to quality stocks. We believe in laying the foundation in the meantime.
As a bonus, our latest video is out: Best Cheap Stocks to Buy Now for October 2021. Luke uses our new portal to find stocks he believes are undervalued.
Make sure to like and subscribe to our YouTube channel!
And if you’re wanting to learn more about our process. Luke and Jason are presenting How To Find the Best Stocks to Buy Now at the Wealth365 summit next month. Mark your calendars for October 12th at 2PM ET and tune in virtually.
It’s free. Click the image below and sign up.