In what has become an increasingly disheartening trend for investors and traders loaded up to the gills on tech stocks, while the DJIA traded up 0.60% on Monday, the Nasdaq lost ground all day and finished lower by nearly half a percent. Had the session not ended at 1 PM, the damage in Nasdaq could have been even worse. Monday’s underperformance was the third time in under a month that the Nasdaq underperformed what had been the out of favor Dow Jones Industrials by more than 1% in a given day.
Naturally, the Nasdaq’s recent underperformance has investors questioning whether the rotation represents a broader shift in investor sentiment out of the high multiple growth stocks and into more cyclical industrials. To help frame this issue, in a just published B.I.G. Tips report, we looked to see how uncommon (or common) it is to see the Nasdaq have multiple days of large underperformance (1%+) relative to the Dow in a four week period. Further, we also analyzed market performance in the period following each of these occurrences. The current period represents the fifth time during this bull market that we have seen the Nasdaq underperform the DJIA by more than 1% over a four-week span (chart below). For anyone interested in seeing this report, sign up for a monthly Bespoke Premium membership now!