Trends Matter

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 One of these blunders is blindly assuming that what just happened will keep happening.

Yes, trends matter. They're a powerful tool for making investment decisions. But you've got to keep a close eye on the trend... because every trend eventually reverses. And it's occurring in stocks right now.

To see what I mean, let's look at how each U.S. sector performed last year...

The overall market fell 18.1%. But some sectors did much better... and some did much worse.

Energy stocks soared an incredible 65.4%. Utilities were slightly positive as well. Meanwhile, four sectors each dropped by 26% or more.

Today, the market has reversed course. Stocks are up 3.4% year to date. But the winners driving that rally have completely flipped. Take a look...

Last year's three worst performers are the top three best performers this year. And the top four from last year now make up the bottom four. It's practically a complete reversal from top to bottom.

We can see the same phenomenon at a broader level. The Dow Jones Industrial Average and its "old school" stocks performed relatively well in 2022... while the growth-focused, tech-heavy Nasdaq Composite Index fell the most. But again, it's the complete opposite so far in 2023. Take a look...

Today, the two indexes have swapped places. The beaten-down Nasdaq is leading the pack. It has jumped nearly 9% in two months. Meanwhile, the Dow is down slightly.


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