The Pain Trade Is Higher Into Year-End

The “pain trade” continues to be higher into year-end. We made Such a point in January, suggesting the 2022 “correction” was complete. Let’s review what I wrote, and then we will expand on why we believe the “pain trade” is higher over the next few weeks.

“From the bullish side of the ledger, the outlook for 2023 has statistical support for a positive outcome. After having a negative year in 2022, the markets were visited by “Santa Claus,” although very late, and the first 5-days of January turned out to be a positive return. As the table below shows, there are only a few periods in history where this has occurred, and each yielded positive returns in the following year.”

stokcs are down

Since then, the market has rallied roughly 10% so far. However, as noted several times, this rally has not been broad-based, as denoted by the divergence between the market cap and equal-weighted indices.

S&P market cap