Two-Minute Investment Update: Market Trends, Volatility, and What We’re Watching

This is Mike Siccaranza, CEO of Affinity Wealth Management, with your two-minute...investment update and kind of give you what our current thoughts are as of the moment. Obviously, if you have any questions, you can always reach out to your Affinity Wealth Management advisor or myself personally. But I thought I'd take a few minutes here, share my screen, give you an idea of what I'm looking at this evening because I like the month end closes because it kind of gives us a very broad, longer term timeframe on exactly what's going on. So let's share my screen and let's take a look at some charts.

So here is the cheat code that I'm always talking about, the S&P 500 moving monthly chart using a 10-month exponential moving average. That purple line is the overline.

And you can see, you know, usually what I've always said is if you're above the line, you want to stay invested. If you're below the line, you want to reduce your exposure. And you can kind of see here, February, for the first time in a very, very long time, the S&P 500 closed below the line. And that's probably no surprise to many people. There's been a lot of volatility to start the year.

with the S&P being down roughly about 9%, 9.5% over that timeframe. Now, am I worried about this? Because typically, as you can see going back over a 10-year timeframe, when it goes below the line, it does show some volatility, some short-term. Well, it's definitely a negative for the overall market in itself. But however, one of the things that's stopping my pessimism here a little bit is if we look at the equal weight of S&P 500 and do the same type of exercise, that number is above the line.

So what that's telling me is right now is that, and again, if you own a lot of tech stocks, you're probably very well aware of this, is that the growth side of the equation that's dominated the market for the last 10 years is not working nearly as well as the value portion of it. You know, the S&P 500 is a cap weighted index, which means that the bigger companies, your Apples, your Microsofts, your Googles, your Facebooks, your Amazons, are weighted much more to the point total in the S&P 500 relative to the bottom 100 stocks. And when we look at an S&P equal weight index, that gives every stock the same valuation or the same level of momentum or weight in the index. And you can kind of see that what this is telling me is that large cap growth is not dominating the market anymore.

It's much more broad in its timeframe. And so the equally being still above its line compared to say in January and February of 2020, or even going back farther to the end of the year in 2018 is a point for the bulls. So we're seeing more of a breadth. We're not seeing quite as much technology dominance.