Market Outlook, for Week Ending 04/09/2021

A Tale of Two Markets

The S&P 500 and Dow 30 indexes continue to reach new highs, but the Nasdaq and Russell 2000 indexes are down since February, and have been flat for weeks.

So, why the divide? I’m still studying this question, but it appears to be function of safe versus growth stocks. The Nasdaq and Russell 2000 have many more smaller cap, more financially vulnerable companies that have higher liquidity risks. Hence, with nominal economic growth beginning to reach limits that markets believe the Fed will impose, safe stocks have an increased advantage over growth stocks.

I see no reason at the moment why this trend won’t continue this week, absent any significant shocks. S&P 500 futures are still predicting, however, that safer stocks will soon also be on a downward trend, as I’ve mentioned many times recently.