In an environment characterized by a series of sector-specific bull runs (e.g., from semis to metals), a winning strategy is to actively trade breakouts as they occur. This capitalizes on rotational leadership and momentum rather than relying on a static portfolio.
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The most profitable periods for trend following occur when market trends extend far beyond what seems rational or fundamentally justified. The strategy is designed to stay disciplined as prices move to levels few can imagine, long after others have exited.
The sectors that outperform in the initial year of a new presidential administration can provide a roadmap for market trends over the subsequent years. This political-macro overlay suggests focusing on current leaders, like metals, for sustained performance.
The current market, with heavy concentration in a few names, is a bubble. However, it's not time to short it. The correct approach is to treat it as a momentum-driven game of 'hot potato,' not a fundamental investment environment. The key is to ride the wave while recognizing its speculative nature.
A multi-year "rolling recession," which affected different sectors sequentially, concluded in April, quietly kicking off a new bull market. This recovery is not yet obvious because many parts of the economy still lag, which presents a significant investment opportunity.
The primary indicator of a healthy bull market is when technical breakouts are sustained and lead to higher prices. If breakouts consistently fail and your positions stagnate, it's a red flag that the underlying trend is weakening, even if indices are high.
Use signals like blow-off tops in adjacent assets (e.g., Oracle for AI) to gauge a sector's maturity. This framework helps differentiate "late inning" trades like AI from "early inning" opportunities like gold miners, guiding effective capital rotation.
When a commodity sector is rallying, resist the temptation to chase laggards (the "degeneracy tail" like platinum). Instead, focus capital on the established leaders (gold/silver), as chasing underperformers often leads to poor risk-adjusted returns.
Investor Mark Ein argues against sector-specific focus, viewing his broad portfolio (prop tech, sports, etc.) as a key advantage. It enables him to transfer insights and best practices from one industry to another, uncovering opportunities that specialists might miss.
The economy did not experience a single, unified recession. Instead, different sectors contracted sequentially over three years in a "rolling recession." This process concluded in April, quietly starting a new bull market and recovery cycle that remains underappreciated, presenting an opportunity in lagging market segments.
Investors hesitant to buy assets like gold near all-time highs can use trend following for exposure. The strategy systematically enters prevailing trends and, crucially, provides a built-in, non-emotional exit signal when the trend reverses, mitigating timing risk.