(Please enjoy this updated version of my weekly commentary from the POWR Growth newsletter).
This Monday, we did our May Members Only webinar. If you missed it, please click below to watch a replay.
In the webinar, we recapped this earnings season, provided a more, high-level overview of my thinking and strategy, and drilled down into some individual positions. The webinars are a great opportunity to share the logic and reasoning behind our strategy and any recent decisions.
This is a reprieve from the day-to-day and week-to-week when we can get too caught up in the price action of the markets as well as the constant trickle of news, economic data, and earnings report.
Of course, these matters are also important but often produce more “noise” rather than actionable information.
The past week is the perfect example of this. From a big-picture view, nothing has emerged to alter the bullish trends of price action, earnings growth, and low rates. However, the week featured more inflation data above expectations, violent price swings in a small range, and continued carnage in certain sectors like cryptocurrency and frothy tech stocks.
Today, the market gapped down at the open and retested last week’s lows. So far, it looks like a successful retest as the market was able to capture the bulk of its losses to only finish 0.25% down.
Last week, I was optimistic that the range was going to break out to the upside especially following elevated readings in sentiment measures and relief from the end of tax selling. In two days, we got a 130 bounce in the S&P 500 between last Wednesday and Friday.
On Monday’s webinar, we talked about how the market had gotten overbought. If the bulls had regained control and this was the start of a trending move, then we would likely see a mild pullback or sideways trading before another thrust higher. And, if this was just an oversold bounce in a range-bound market, then we would quickly give back these gains.
Clearly, the market remains in a choppy range, and we’re back to the midpoint of the range.
Yes, this is a meaningful development.
It merits being more mindful of risk and more disciplined. Return targets and expectations should be reasonable in this environment.
More importantly, success in this environment is about maximizing financial and emotional capital for when market conditions for growth stocks do improve.
I think we are doing a pretty good job of this. Since inception, the POWR Growth portfolio is up 0.5%, while the S&P 500 is down 0.5%, the Russell 2000 is down 2%, and the S&P 500 Growth ETF is down 4%.
However, I’m also staying vigilant, because the more time we spend in this range, the more vulnerable we are to a breakdown. I’m also noticing that many of the stronger parts of the market that were resilient for so long are also starting to be pulled down into the selling vortex. These include some commodity stocks, homebuilders, and industrials.
And, I’m not seeing any strength, in the form of new market leadership that attracts inflows, to offset this bearish development. The parts of the market that have been strong in recent weeks are not consistent with strength in growth stocks. These include precious metals, consumer staples, defense stocks, and big-box retailers.
Market Commentary Summary
To recap, from a fundamental perspective, the market is strong in a bull market backed by earnings growth and rock-bottom rates that have much room to rise before real rates turn positive and start competing with assets for inflows.
Therefore, we continue to have a constructive stance on the market. However, there are some troubling developments under the surface that indicate the environment for growth stocks could deteriorate even further.
How this situation resolves is probably the biggest near-term factor in the portfolio’s performance. I’ve already made some subtle shifts in terms of entry and exit tactics but will make more tangible changes to strategy and positions in the event that the market decisively breaches the range to the downside.
What To Do Next?
The POWR Growth portfolio was launched in early April and is off to a fantastic start.
What is the secret to success?
The portfolio gets most of its fresh picks from the Top 10 Growth Stock strategy which has stellar +46.42% annual returns.
If you would like to see the current portfolio of growth stocks, and be alerted to our next timely trades, then consider starting a 30 day trial by clicking the link below.
All the Best!
Chief Growth Strategist, StockNews
Editor, POWR Growth Newsletter
SPY shares were trading at $415.28 per share on Thursday afternoon, up $4.42 (+1.08%). Year-to-date, SPY has gained 11.44%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Jaimini Desai
Jaimini Desai has been a financial writer and reporter for nearly a decade. His goal is to help readers identify risks and opportunities in the markets. He is the Chief Growth Strategist for StockNews.com and the editor of POWR Growth newsletter. Learn more about Jaimini’s background, along with links to his most recent articles.Stock Market Roller Coaster appeared first on StockNews.com