Today’s Market Is a Wall Street Joke

This market is surreal. [Jeff Clark's Market Minute]( Today’s Market Is a Wall Street Joke By Eric Shamilov, analyst, Market Minute Lately I’ve been speaking with traders that’ve been through market crashes like the ones in 1987, 2000, and 2008… After all, gaining intuition from others’ experience is more valuable than just looking at data. Unfortunately, they’ve all echoed the same troubling statement… This market action is unlike anything they’ve seen before. Sure, market crashes are inevitable when investors stampede through any semblance of rationale. That’s just the boom-and-bust cycle, and there’s no escape from it. But these traders are talking about the wild intraday swings going on now. So, in response I mentioned an ongoing joke on Wall Street… “There are now more indexes than there are stocks.” It would be funny if it weren’t true… Recommended Link [The #1 Stock Set to Benefit from High Gas Prices]( [image]( It’s not a Big Oil stock… in fact, it’s beating Big Oil at their own game. Get the full story on a tiny, under-the-radar company selling for less than $20. [CLICK HERE.]( -- But according to a Bloomberg article from May 12, 2017, this is the exact lunacy we find ourselves in. It’s why we’re seeing selling – seemingly out of nowhere – on a wholesale basis. You see, the indexing business is big for Wall Street. They’ll create an index, then create an [exchange-traded fund (ETF)]( and sell it to the public. But there’s only so many ways you can slice and dice a finite set of stocks. This is creating the same type of adverse conditions that indexes are supposed to protect investors from. But, no one is talking about this. Instead, people are blaming the Fed for valuations that paralleled those of the 1999 tech bubble. We saw these levels as early as January 5. For sure they dropped the ball… as we here at [Market Minute were saying throughout all of 2021](. But over-indexing and major flaws in their construction are to blame as well. You see there are two problems… First, many indexes like the S&P 500 are more representative of momentum than they are of the U.S. economy. For instance, the S&P 500 is market cap-weighted. Meaning that when it rebalances (usually quarterly), the stocks that rise the most will get a bigger weight. Today, we’re in a Fed-induced bubble of epic proportions due to 12+ years of interest rates near zero and force-fed liquidity. As a result, the index has basically become a proxy for big-cap tech stocks. Almost 30% of the index is comprised of just 10 stocks like Apple (AAPL), Amazon (AMZN), Tesla (TSLA), Alphabet (GOOGL), and Meta Platforms (FB). It’s interesting that, as a whole, analysts have been estimating even higher earnings and sales growth over the next year… except for these 10 stocks. Yet, as a whole the S&P 500 Index is poised to grow in earnings and sales. Take a look at this chart showing what’s really going on within the weeds of the index… [chart] [(Click here to expand image)]( You can see the earnings-per-share (EPS) and sales estimate for these 10 stocks… and then the rest of the S&P 500 index since April 20. That date coincides with the beginning of this recent big drop in the market – when the S&P 500 index was at 4500. It’s at 3930 now – down 12.5% in less than a month. The market’s been falling so much because of these 10 names. You can see how analysts have been slashing earnings and sales estimates for them, but upping it elsewhere. That means investors flocking to the perceived safety of a “diversified” value index like the S&P 500 are really getting concentrated exposure of stocks that are in the middle of coming out of a bubble with a sprinkling of everything else. Which is sad… Because everything else shouldn’t be down this much. Free Trading Resources Have you checked out Jeff's free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. That brings me to the second big problem Wall Street has: ETFs. When institutions dump these horribly constructed products, they bring down everything else with them. And because the use of ETFs and indexing is so prevalent, traders just haven’t seen this type of price action… where it drops, rebounds, and drops again 5% multiple times a day. Using an index or ETFs for portfolio construction is like using blunt force. For an industry that prides itself on being the smartest in the room, this is the biggest self-inflicted wound on an industry-wide basis I’ve ever seen. [Will You Be Left Behind?]( Investors must understand that if they want to protect their portfolios in this environment, there’s just no safety in numbers – contrary to what they have been telling us about the safety of passive investing using indexing and ETFs. Investors need to be more pointed, and add the type of precision to portfolio construction Wall Street only thinks it has. A more equal weighted approach, with an [emphasis on high-quality stocks]( would be a good start. Regards, Eric Shamilov Analyst, Market Minute Reader Mailbag Will you be more hesitant about using ETFs in the future? Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com. In Case You Missed It… [The best $19 you’ve ever spent]( “Hi, my name is Jeff Clark. For the past 36 years, I’ve helped people from all walks of life make money in the markets. Retired stockbrokers… presidents of companies… people with almost no financial experience… and everything in between. But I haven’t done it the usual way… My method is different. It’s unlike anything you’ve probably ever seen before. [We’re unveiling it right now for just $19.]( That’s the lowest price currently offered for a trading research service… And it won’t be available for long. [Watch a ‘10-second live demo’ of this method]( to see how it works.” [Watch now!]( [image]( Get Instant Access Click to read these free reports and automatically sign up for daily research. [The Ultimate Guide to Taking Back Your Privacy]( [An Insider’s Guide to Making a Fortune from Small Tech Stocks]( [The Gold Investor’s Guide]( [Jeff Clark's Market Minute]( Jeff Clark Trader 55 NE 5th Avenue, Delray Beach, FL 33483 [www.jeffclarktrader.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. Jeff Clark Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-800-752-0820, Mon–Fri, 9am–7pm ET, or email us [here](mailto:contactus@jeffclarktrader.com). © 2022 Omnia Research, LLC. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Omnia Research, LLC. [Privacy Policy]( | [Terms of Use](