Bull Market Behavior Is Being Rewarded

The mega-caps are lagging, but the weight of the evidence is improving

An often overlooked ingredient for protracted bull markets is persistent optimism. While lows are made in the depths of despair and amid rampant pessimism, it is bulls that help keep bull markets healthy and power them to new highs. Elevated optimism is a key feature of bull markets. Risks rise when pessimism replaces optimism, not when optimism comes off its boil.

As we mentioned last week, the S&P 500 continues to be hampered by weakness in from the largest sectors and strength in the smallest sectors. To re-iterate, this is the S&P 500’s problem - it does not have to be your problem. Half of the ETF’s in our Global Macro ETF rankings list made new highs last week (see below for more details). Investors have rarely had an opportunity set of strength this broad. Our bull market behavior checklist shows that bulls continue to check all the right boxes.

Overall, the weight of the evidence continues to tilt toward embracing opportunity and away from concerns about elevated risks.