(Written by Bert Dohmen, contains excerpts from our latest Wellington Letter published November 24, 2024)
We are hearing the phrase “everything rally” quite often lately, just as enthusiasm is once again approaching all-time highs.
The recent election outcome was the most important event since the Reagan election, or even of the last 100 years, which gave new life to the market rally.
However, not everything has been going up. Although some analysts disagree, we would not call this quite an “everything rally.” A few sectors that have not participated include Solar, Health Care, China, and Europe, among others. Will these be the targets of the big, smart money to sell into year-end? Let’s look at some charts.
Below is the long-term monthly chart of the Solar ETF, TAN. It has plunged 72% over the past 4 years and over 32% this year alone!
Since the election of DJT became likely a couple months ago, the health care industry, which is loaded with corruption and captured US governmental health agencies, has been declining.
People must realize that a shakeup of the Washington corruption will have adverse effects on companies that have thrived by hooking up to the evil politicians. Their revenues will plunge.
Such shakeups are long overdue but will cause plunges in stocks of companies that benefitted from the corruption, such as the vaccine makers and dangerous health mandates.
Most attribute the plunge in health care stocks to RFK Jr., who said “If you work for the FDA and are part of this corrupt system, I have two messages for you,” he continued.
“1. Preserve your records, and 2. Pack your bags.”
Below is the short-term daily chart of the health care ETF, XLV, which plunged over 12% from its September high to its recent low.
China was called the locomotive of the global economies. Will China’s losses lead to similar gains in the USA and other countries as Chinese factories relocate? Eventually, but it takes a long time to build the factories and facilities in other countries that are now empty in China.
Despite all their stimulus efforts, China is being left behind because it is a communist dictatorship. There is no economic or personal freedom. See the long-term monthly chart below of the ETF for large cap China stocks, FXI. It has plunged 61% since its 2021 high to the low earlier this year.
In early October 2024 it made a top and has plunged over 21% since then.
Europe has gone further to the radical left than the US, led by the UK and Germany, and they have not yet rejected the radical left. In the UK, the prisons are full and criminals are being released to make room for people who post “misinformation” on social media. Next year, watch for Europeans to immigrate to the US…legally.
Europe will be in bad shape until their citizens get the same courage as Americans and throw the left wing bums out.
See the short-term daily chart of the ETF for Europe Equities, EEA. It has plunged over 12% since late September.
CONCLUSION: With stock valuations at all-time highs, money managers with little cash are risking their jobs. The one justification for buying now is to first sell underperformers, like solar, health, China, and European stocks, in order to buy outperformers such as AI and related sectors, in order to “dress up” their year-end portfolios.
Although no one has a perfect view of the future, we depend on our technical analysis, which measures money flows in and out of a stock or an index to give us clues.
Anyone using the other old worn-out metrics like PE’s will be at a disadvantage.
Wishing you successful investing,
Bert Dohmen
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