The Election Effect
After all the fear and angst about the outcome of the presidential election, the worst thing that happened to the markets was a buying-pause. A few days before the election, although the VIX spiked, treasuries fell, indicating that investors weren’t running for the hills. They instead took a few profits off the table while waiting for clarity.  Meanwhile, analysts speculated that no matter who became president, more money would be greasing the skids of the economy for months to come. As the election progressed, investors became convinced we would have a split government, which means that higher taxes and the Green New Deal would be off the table... and the markets would likely begin drifting higher. 

Vaccination Reality Triggers Bad Breadth 2.0
The market is said to have good breadth when all boats are rising on the tide. The rebound from March's Black Swan event quickly produced new sets of winners and losers. Home offices, online shopping, home entertainment, and exercise equipment flourished while energy, transportation, restaurants, and travel took it in the shorts. Monday's gigantic rally following the announcement of the first Covid-19 vaccine approval made clear that the prior losers were finally going to start their recovery in grand style, and it will be at least partially funded by taking profits from the former winners. The Bad Breadth 2.0 chart (right) illustrates this reversal of fortune. This is tremendous news for proficient momentum strategies - we can ride the recovery wave a second time! If the rebound momentum winners simply mark time, multiple sectors could still easily double from their present values. 

Playing the Bad Breadth 2.0 rebound is an amazing opportunity. This is a perfect time to review your strategies and make sure you have two or more of the Feb-to-Nov losing sectors in your strategies so they can be selected by the algorithm during their recovery. Whether or not the market will take off from here without digesting Monday's move is yet to be seen.  An upside surprise like this requires that investors find cash somewhere to buy these diamonds in the rough. Recent high fliers are commonly sold off to provide that cash and then rebalanced later. Stocks and sectors that took a hit after the vaccine announcements are more likely to recover in the short-medium term than dive down further. We are definitely not done with new technology, the shift to home offices, or exorcising at home. What was made crystal clear is that investors believe the rest of the economy will be roaring back over the next six to 12 months. As it does, our algorithms will inherently find and ride the sectors that will do well during Bad Breadth 2.0.  

Meetup Announcement
Introducing New Momentum Indexes for Individuals and Advisors
Live Webinar Details:  Saturday, Nov 28, 4:00 PM PT
This webinar will formally introduce a new pair of aggressive fund indexes: (1) the MAI SectorSurfer Momentum Index, and (2) the MAI Best-of-Breed Core Momentum Index. They are designed to complement the two fund indexes we introduced during the prior year: (1) the MAI Bull-Rider Bear-Fighter Index (growth), and (2) the Tactical Growth and Income Index (conservative. Together, this family of fund indexes is designed to provide both individuals and advisors a full range of indexes to help them better achieve their specific risk/return targets.

 
May the markets be with us,