Dana and I took a weekend trip to another part of the US, which happened to coincide with the iconic band “The Eagles” being in town on what I think is their second or third “farewell tour.” They haven’t lost a step in decades. Now, on to the markets, but with a decidedly Eagles theme, writes Robert Isbitts, founder of ETFYourself.com.

The markets have been living “life in the fast lane” since October 2022, and it has surely made many market strategists lose their mind, figuratively. With all the government and consumer debt piling up...tech valuations stretched beyond what seems possible for even those giant companies to grow into...and a growing list of behind-the-headlines data on employment and the economy in general...how does the market sit near all-time highs?

Here’s why: Because most stocks have gone nowhere for two-and-a-half years. I’ve cited that before, but it is worth repeating over and over. Frankly, the most optimistic thing I can say about US stocks is that so many have been flat for so long (net-net since 2-5 years ago), they are due to resume the long-term upward trend that the stock market tends to have.

The chart below sums it up visually. Since this time last year, the Invesco QQQ Trust (QQQ) has soared 41% and the S&P 500 ETF Trust (SPY) has gained 21%. But that’s the end of the good news, essentially. And the start of the deception.

A graph of stock market trends  Description automatically generated with medium confidence

Because the average of the S&P 500 stocks gained only about 4%, slightly under T-bills. And when we include the next 500 to analyze the top 1,000? On average, they are down! I don’t know what the top story is here: 1,000 stocks averaging zero in what some call a bull market or the fact that the average stock has trailed SPY by nearly 2% per month for 12 months.

And small caps – as measured by the iShares Core S&P Small-Cap ETF (IJR), an ETF with a healthier set of stocks relative to the iShares Russell 2000 ETF (IWM) – are in the red for the past 12 months. Ditto for the Arrow Reverse Cap 500 ETF (YPS), which is an “inverse S&P 500” ETF where the weightings are reversed so the giant stocks count the least.

Okay, now for the big finish and the encore (yeah, more rock concert/Eagles song titles talk)...

“I can’t tell you why”…the market is so messed up. That’s not our task. Ours is to figure out where to pursue return without blowup risk.

“Wasted time”…not really. Investing is a process of consistently applying an approach and discipline, and being flexible at every turn.

“The long run”…is a series of short-run time frames of evaluating and monitoring risk. The ROAR Score we use and update each week aims to consolidate all of that brainwork and range of possible outcomes into a single number. Recently, that number remained at 20, so our mighty 2-ETF portfolio remains at 20% SPY and 80% SPDR Bloomberg 1-3 Month T-Bill ETF (BIL).

Thank you! And sorry, I couldn’t find a good way to fit “Hotel California” into this discussion. Oh wait, I just did.

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