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AAM Viewpoints – Market’s Expanding Leadership Buttressing the Uptrend




One of the most consistent and enduring qualities in this bull market cycle has been its broad and diverse sector participation. This has accounted in no small part for the remarkable elasticity stocks have exhibited over the years, regardless of the event-driven challenges in their path. Another attribute has been the market’s uncanny ability to address price and sentiment excesses at timely intervals. This has routinely curbed unwelcome surges of speculation. Investor psychology has remained in check and a shift from optimism to euphoria has been averted that otherwise may have proven a harbinger of a major market peak. Recurring positive technical occurrences in the market such as these have been evident amid aggressive rotational actions that have taken place so far in 2021. Despite the rigorous consolidation in several momentum leadership categories, including Health Care and Technology, the major market indices led by the Dow Jones Industrial Average (DJIA) have climbed to record highs in March.

As the marquis growth leaders bottom and rebound, and traditional cyclical categories maintain their bullish trends, a strong argument can be made that theme participation is expanding in the advanced stages of this bull market run. The recent harsh selling in several of the market’s growth categories has market pundits sounding the death knell for aggressive growth. Indeed, many stocks within these areas have sustained steep selloffs that have sliced through widely watched technical trendlines. However, I find the declines to date have constructively addressed the numerous overbought conditions that developed following their meteoric rallies from the March 2020 lows. There may not be an immediate return to the momentum-themed Wall Street “darlings,” but that could be a welcome development which allows for greater inclusions of sectors and more balanced gains among themes that have emerged as burgeoning participants in the last several quarters, including the closely watched Financials.

Industries that for years played second fiddle amid the big advances in Consumer Discretionary, Health Care and Technology categories have emerged as formidable long-term leaders. Agriculture, for instance, is benefiting from the prospects for inflation on the horizon as well as the global “wealth effect” that could shift food consumption trends, placing more demand on grains, fertilizers and agriculture machinery and equipment. This industry is part of a bigger theme that is coming to the forefront – Infrastructure/Materials. Aluminum, copper, and steel stocks have been gaining along with industrial chemicals and building materials. These additional growth areas are providing greater leadership depth and diversity that could reinforce the foundation of this historic bull market and facilitate achievement of my upwardly revised DJIA target of 40,000.

CRN: 2021-0304-9001 R

The opinions and views of this commentary are that of Peroni Portfolio Advisors and are not necessarily that of Advisors Asset Management.

This commentary is for informational purposes only. All investments are subject to risk and past performance is no guarantee of future results. Please see the Disclosures webpage for additional risk information at commentary-disclosures. For additional commentary or financial resources, please visit www.aamlive.com.


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