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Market movement is a constant part of trading and investing. In this episode of Stocks In Translation, Yahoo Finance’s markets and data editor Jared Blikre, along with Yahoo Finance producer Sydnee Fried and Catalysts co-host Madison Mills, break down market rotation, seasonality, and how to understand market movements.
“Markets can either be rotating or they can be trending. And when they’re rotating, they tend to go sideways,” Blikre explains. When investors “see everything hitting new highs every day,” that usually indicates that we are in a “bull market. And the opposite is also true. When things are going down every day, that’s a bear market. But in between you just have this market rotation. And so that’s kind of like keeping the market alive. Some sectors do well, some sectors don’t, and they rotate.”
Mills talks a bit about the “idea of whether or not certain sectors of the market have come in and out of a recession versus the broader economy. And whether that’s part of what we’re seeing in the rotation right now, because it has been such a weird moment in the market. And maybe the macro environment didn’t have a, so-called recession in 2022, but maybe certain sectors did, maybe we’re starting to recover from that.”
Mills notes that “the market reminds me of a petulant child sometimes… As soon as they get exactly what they wish for, then they’re upset about it.”
“For the most part, if you’re in the market over long term, things go up. Now where people get tripped up, is when they try to start juicing returns with leverage and getting those returns quicker,” Blikre says.
Twice a week, Stocks In Translation cuts through the market mayhem, noisy numbers and hyperbole to give you the information you need to make the right trade for your portfolio. You can find more episodes on our video hub or watch on your preferred streaming service.
This post was written by Mariela Rosales.
Video Transcript
Welcome to Stocks and Translation.
I am your host, Jared Blick.
As always, I am joined by the voice of the people, Sydney Fried.
And today we’re doing something a little bit different.
We have a very special guest, Madison Mills in the studio before we jump into the conversation.
Be sure to like, subscribe and comment on Stocks and Translation on Spotify, Apple Music, youtube, wherever you get your podcast.
And uh we’re gonna talk about what’s going on today.
I am in the hot seat taking questions from you guys and uh we’re going to keep it real here and we’re just gonna kind of experiment to go Ron Robin and see what you guys are thinking about.
So, are you ready to be the guest chair?
I am ready to be the guest.
All right, let’s kick off with something about rotation because market rotation is something that I actually kind of struggle to understand a bit are markets rotating right now.
Why is everyone kind of talking about it and stressed?
Yeah, I think you can think about it this way.
So markets can either be rotating or they can trending and when they’re rotating, they tend to go sideways.
So for instance, the NASDAQ hasn’t had a new high in a few months and we’ve seen the S and P 500 at record highs.
So there’s, that tells you that there’s rotation going on there.
Now you carry that forward.
You know, what does that mean for the average investor uh when they see everything hitting new highs every day?
Well, that is usually means we’re in a bear or bull market.
And the opposite is also true when things are going down every day, that’s a bear market.
But between you just have this market rotation.
And so that’s kind of like keeping the market alive.
Some sectors do well, some sectors don’t and they rotate.
But how do you identify it?
Like let’s say I’m just using a random example, let’s say tech is down 10%.
Does that just mean people are rotating out of tech or do you have to see that 10% show up somewhere else?
So that your correction territory is another thing, let’s say 10% because that’s the magical number for correction.
Now, this kind of leads to a discussion about bull markets and bear markets.
And this is something that I’ve said for years, media has their own definitions of bull markets and bear markets that they use to make things simple and to convey information to everybody out there and it kind of works.
But people who actually trade for a living don’t use these definitions because they’re not useful for the most part.
Um, it gets back to, uh, you’re asking.
So, if we see the NASDAQ down 10% do we need to see the dow up?
10%?
It’s not that perfect.
It’s not that easy.
You know, finance is messy and I’ll just, I’ll leave it there.
Yeah.
How do you understand the market rotation?
Maddie.
Well, I was telling Jared this earlier, I think the market reminds me of a petulant child.
Sometimes you pick it up as soon as they get exactly what they wish for.
Then they’re upset about it for months.
We were talking about the A I rally driving so many of those all time highs that you mentioned, Jared and how that’s scary.
And you don’t want just Invidia and five other stocks driving the entire market.
Now, suddenly you’re welcome guys freaking out about the rotation and now, oh, no.
Are we going to hit our price targets for the end of the year?
Why aren’t they just happy?
You ever hear this?
Like we want, we want stocks at record valuations and then they go down 10%.
And everybody’s saying, ok, well, it could go to zero, it could go down another 10%.
We could be in a bear tomorrow.
And I think that’s kind of the, the, the theory there is that when things get a little bit scary, they seem a lot scarier than they are.
So people get chased out of the market.
But I think you’re right, the grass is always green on the other side.
In finance, there’s always somebody who you can’t, who you can just imagine is making a lot of money over there in crypto.
And you got to make it up here in stocks.
And how are you gonna do that?
Well, these lead to bad decisions for individual traders and that’s why we kind of get back to the passive investing uh versus active because for most people, passive is probably the best solution.
Are we the drama though?
In the?
Yeah, like if it wasn’t for people reporting on this, would the average person be like, oh, I’m really concerned about whether uh these companies are actually seeing A I show up in their profits.
Like, I mean, analysts are, but are you asking about the media function like checking corporate America?
Because there, there’s a, there’s some different thoughts on that.
I’m having a crisis, a crisis.
I think you have some thoughts on this actually.
Well, it’s interesting, I think that they may not phrase it like that, but I think the investors that I talk to and I do this a lot on Tik Tok in terms of like talking to people about their own portfolios, they’re just worried about the tech trade because what they know is they’re a 401k millionaire for the first time and we have record breaking numbers for 401k millionaires because tech has gone up so much and that’s obviously a really simple thesis on that.
But, uh, that’s why when they, you start to hear even, you know, oh, NVIDIA earnings did well.
But then the stock went down.
That’s, I think what the concern is more so than us pontificating about it.
But it also, it, it makes me wonder about this idea of whether or not certain sectors of the market have come in and out of a recession versus the broader economy and whether that’s part of what we’re seeing in the rotation right now because it has been such a weird moment in the market.
Uh And maybe the macro environment didn’t have a so called recession in 2022 but maybe certain sectors did and maybe we’re starting to recover.
Yeah, you know, when we talk about recession, it’s contextual because we can have an earnings recession, which is two quarters of negative eps growth and then we can have a general economy recession in the US.
But when we say that, I mean, the US is a really big place.
Uh these and we’re these national accounting identi identities, national accounting identities as GDP, GNP, these things that we try to measure apples to oranges and come up with one number for the entire economy.
When you do that, you simplify things and just to get back to the main point, uh could you have a recession in Florida while New York is booming.
Absolutely.
And I think that accounts for a lot of the disconnect that we’re seeing and that we hear in the media, not necessarily today, but always is that there’s always that disconnect some parts, I mean, it’s possible that every place is doing well at the same time and every place is doing poorly.
But when you have this dichotomy where some are doing well and some are doing poorly, then, you know, you have, you have this, uh, kind of like, uh, not the word.
Yeah, a soup.
How about that?
Cognitive dissonance is what I was looking for.
But so let’s, um, let’s pivot to seasonality because that’s another word that when I producing my segments and we’re on air, everyone’s talking about seasonality.
September, September is a vol little month.
It’s a wild month.
Why?
Like, why is everyone freaking out?
Is, is really September the same every year.
It’s, you know, is it, um, I, every, every September is different, right?
But I think there are echoes and I’ve come to, I’ve come to understand the market in a way that seasonality is a lot more important that I even, I ever imagined when I was starting out trading.
And I think it just comes to the fact that people are adding money to the stock market on a regular basis, like every two weeks in their 401k for the most part that’s on automatic pilot.
And so that gets into people’s payroll schedules and all this, there’s a million different things going on.
But in aggregate, you tend to see these cycles that repeat and then when you have similar geographic or, or similar events occur throughout the world, maybe different catalysts, but they might happen at different times of the year.
Um There are reasons why things happen in September.
Uh the, the summer’s over, people have been vacationing time to reassess reality.
You’ve got back to school.
So people are moving because of their kids.
And uh it just creates this uh this soup if you will.
But what fascinates me about this Jared?
And I’m, I’m very excited for you to correct me because I really struggle with uh tech goog versus fundamentals when you’re sussing out a company or a stock.
I’m very pro fundamentals because technicals now.
Oh no.
Well, let’s not say, oh no, the king of the technicals.
But also, and I run into this a lot with guests on our live show where I, if they come on to talk about technicals, I just say, how do you possibly have a direct comparison between today and history when we’re coming out of a once in a lifetime time pandemic?
You have an A I boom, a technology that’s never been here before.
What can the past teach me about this moment?
I know, I know I’m wrong.
No, no.
The, the emotions, the human emotions of fear and greed are embedded in the market in various ways.
And that is a prime example of how they are.
And the reason I think technical analysis works is because, and I, you can get, you can get a little too cute and you can probably prove things that aren’t true.
You can, you know, you can read too much, you can do whatever you want into the data.
So it’s easy to deceive yourself.
And that’s the, that’s the difficult part because technical analysis at the end of the day is an art.
It’s not a, it’s kind of a science, it’s kind of an art.
But you know, there’s a decision that has to be made by the operator.
So you know how you’re interpreting it, it’s gonna be different from person to person.
But if you look at candlesticks and I love candlesticks, you love because they tell you four important points about the day.
What was the open?
What was the close?
What was a high, what was the low with that?
You can determine what people were feeling throughout the day.
And then these patterns over long periods of times, they’re fractal in nature.
So they build up in the slower time frames, the lower time frames like intraday, they build up to the longer ones, like even multi years, multidecadal.
And uh there’s a million ways you can slice and dice all of this.
Uh But that’s kind of how I see things.
Well, going back to seasonality.
Is there something for every month.
Like, I know that there’s a January effect.
Is there, like, is there one for every month, February?
That’s a good question.
I don’t think every month is equally important.
Uh, December is another good one because every year things wind down at the end of the year.
It’s simple.
Like the reason, I think the reason stocks go up at the year at the end of the year is it’s, people go on vacation, they don’t want to reassess reality.
And without, unless there’s a huge shot which doesn’t usually happen at the end of the year because people are on vacation, you know, um, unless that happens, you don’t have a need to have markets fully liquid 100% of the time when you guys are reporting stories and you’re on air.
Do you actually consider what month it is?
Like if I, that’s a stupid question but like, I don’t even know what month it is.
I kind of mean, like, all right.
So everyone talks about like the January effect.
So you start talking about it, right.
But like, is that another media thing that everyone just starts talking about or do you actually see the media, what’s going on?
I love it.
I’m just trying to understand why we do some of the things we do.
Right.
If it’s April, are you like, well, I know it’s April because stocks are doing this and last.
Exactly.
Is that what you take into account only in September and December.
I think I pay attention to the big one.
So I think January is important.
I think September is important.
December.
Um, you know, volatility has its own schedule, which is a little bit independent of equities but, and we can talk about the VICS and why that is.
Um, but I think seasonality in general, if you, if you were to look at stocks and bonds and the Vics and currencies and put it all together, this is what Jim Simons of Re Renaissance technologies did.
Um He recently died but over 30 or 40 years, he had an annual returns compounded annual growth rate of something like 50 60%.
That is, you know, year after year after year after year after year, that compounded.
That is, that is simply amazing.
That was all alpha embedded in the market because of seasonality that he unlocked because he got together a crack team of phd S and they just figured it out.
So sticking with seasonality a bit, a chunk.
What trends are both of you hearing from gas or in your research that we’re gonna see as we head into the winter months.
So I look at September and the reason September I think has some of the worst returns on average um is because that’s when you see this back to school, when you see this reassessment of reality after the summer, when you see the vics.
Um you can either.
You don’t crash every year, obviously.
And so when we talk about history, we talk about averages and it might be a median.
But, you know, you got to consider it, it’s not an extreme, it’s just, you know, it’s kind of what’s in the middle.
Um, I don’t know where we began with this question, but what are you watching?
I mean, I’m, I’m thinking like, even presidential election rate cuts even for the next year, you can do, you can gauge seasonality even on the US presidential side.
So, not just every January but the January of the first year of a new president or the December of the last year or the election that, you know, the election month uh of election year, November and this year is supposed to be very bullish right after the election because that’s when we see the clouds clear historically, that’s what happens on average.
But again, it doesn’t have to.
Yeah, it’s fascinating too though because even with something like the election of 2016, there was this idea in the market that there was going to be a crash.
If Trump won and Trump won, there was overnight.
Let’s not forget that it was, it was very dicey for a few hours and then it wasn’t and then it wasn’t.
Right.
And then, oh, well, actually this is going to be good for I, I, the way that I think about it is that I’d love to get your thoughts on this later, Jared stocks always go up the question of whether or not they do and, and why and how much that’s driven by tech versus who’s in the White House.
This is a fascinating one to me.
Uh So the market is just an optimistic little baby at the end of the day.
And so once, once they digest the data, there are the information about who’s president, they’ll say, ok, well, this will be good for business, whatever.
Let’s move on.
All right, we’re gonna take a short break here.
But when we get back more, getting personal with Sid Maddie and me, we are back and Maddie has a scintillating question here.
Go for it.
I do.
Well, we know, uh, throughout kind of the street mentality that stocks always go up.
It’s in my Twitter.
Bio stocks go up.
Why is that true?
Well, Miles said it years ago.
It’s actually Miles Lin head of news here at Yahoo Finance who coined that phrase, I believe it’s, it could have been anybody.
But I think, and Miles has been saying this for the eight years that I’ve known him here.
But because you look at history, like almost every year stocks go up and there, there’s outlier years and there’s a, there’s maybe 20% of years that don’t.
But for the most part, if you’re in the market over long term things go up now where people get tripped up, um, is when they try to start juicing returns with leverage and getting those returns quicker.
Like if you want, if you want to retire on, uh, a few million dollars when you’re 80 that’s a much different plan than making a million, a few million dollars in the market tomorrow.
And that’s kind of what happened over the pandemic when we had all the stimulus money, when we had, uh, that, you know, that fed into FTX, people got hooked on leverage and thought the party was gonna last last forever.
Then it didn’t.
And so that’s an example, you know, stocks don’t always go up.
But, uh, a lot of the time they do, I think most, I hope they do.
If you own my own city, if you, if you’re doing the Warren Buffett approach to invest over, like you could probably measure over five years, over 10 years.
The S and P 500 really hasn’t gone negative for that long of a time.
Now we’ve had long bear markets, the depression, the Great Depression, 19 thirties was a big one.
And we’ve also seen, you know, episodes since and, but for the most part, we’ve seen a lot of, a lot more bullish shears and bears.
I think like, if you don’t look at your whatever brokerage or retirement accounts you have for a while, you’ll be surprised.
But if you’re someone who’s checking in with them every day, you’re like, oh, damn, it all went down I don’t know.
Do you, do you check your account?
I find it.
I try to stay away if it’s, unless I want to feel like I’d want to do something.
I don’t want to be informed.
I want to, I want to know for sure.
I tried to do a quarterly check in that way.
I see that it went up.
But also honestly, I’ve been investing my 401k for the past eight years.
I mean, it’s been a pretty great run.
So dopamine, I think since I started working in this industry, I check it way more than when I was just kind of like letting it go.
I like anything.
If you’re focused on that in your life, you’re going to like to have it happen more.
Um I have a personal question for both of you.
We’ll start with Jared because, because it’s kind of coming from what you were just talking about.
What do you do on days when you don’t understand the market?
Whether that’s like a stock move and you don’t know why this is happening or like maybe data came out and things are moving in a contradictory.
I mean, it’s, it happens all the time that the market will make a sudden big movement and this, I think this happened yesterday or, or maybe the day before, but it happens quite frequently, market goes up or down for no reason what’s going on.
Well, it could be just some random big order that got, you know, placed at a certain point in time.
Um, I’m gonna get back to your, the technicals.
You, you probably look at the technicals when you don’t understand.
Well, so what gives, what, what I, what I will do is I will look at the technicals.
Now, we’ll go to a terminal, I’ll try to match up news time stamps.
I’ll try to see, you know, what news was coming out at this time of the day that we got a big spike or we got a, a dip in the S and P 500.
And then if there’s something there, you know, then you have an answer.
But a lot of times there’s not an answer there and the tricky part and you probably, you guys know this is sometimes there’s something there and you latch on to like I want this to be the answer.
You know, you know, home sales, home sales were down to, that’s why the market is down, but it’s not always that simple and sometimes sometimes it’s just random.
Oh Yeah.
No.
As a, as a producer, I think it’s so scary when you don’t when you’re not as familiar with a certain subject and you’re trying to attribute something to that move.
You’re saying like gold is moving because of this.
You know, not necessarily, you can say what the move in gold is and then say that something is happening, but you can’t like attribute the I love.
These are reporter, reporter tricks.
You want to get it right.
You want to get it right.
But that’s true.
You don’t want to ascribe meaning if you don’t think there is one and that’s also editorializing.
So safe move is not.
Well, I always just say one potential explanation move because that way you’re safe regardless because to your point, Jared, there’s no way to know if it’s a hedge fund selling off $50 million in a stock.
And then retail saw the move eight hours later and then they got on board and you, you really are never going to have full transparency.
Correct me if I’m, how are you ever going to have full transparency?
I mean, eventually you might know everything with perfect hindsight, but I don’t, I don’t know if that ever not in the immediate, right.
I remember I used to when I first started covering markets, I would see something like Tesla was the biggest mover of the day and I would call a Tesla analyst and say, ok, well, why is it moving?
And they’d be like, you idiot, it move a ton every single day.
Um And, and similarly, I remember talking to Steve Sosnick with interactive brokers about uh why the market was selling off because I was so used to it ever since I started covering markets, it’s been going up, up, up and up.
So we had a big sell off and I was like Steve, what is going on?
Are we heading for a recession?
And he was like, Maddie, call me on the days when still hitting all time highs, not the days when we’re recovering just a little bit to the downside because that’s a great point because what’s happening in the market is you could be at record highs, but the market might be ready to just go down.
And I think that’s why a lot of people pull the plug on their investments are like we’re at record highs.
It has to go down.
No, it doesn’t.
But sometimes, and you got to look for the signals and study history to see when it might go down if you want to try to time the market.
But that gets back to the active versus passive.
You know, do you want to be looking at your account every day?
I’ve had a, I’ve had a passive account here since I started Yahoo Finance.
I’ve enjoyed that kind of watching it.
But my history is day trading futures with a lot of leverage.
And that’s a totally different game.
Oh my God.
I would not be able to do that.
How do you have the stomach for it?
Jared?
Uh It’s hard.
It just takes like anything else.
You do it for a while, you notice some patterns and you develop a methodology, you execute it every day and then you get some results and you say, well, is it worth doing?
This anymore.
I said no, because it was just a lot of headache and I’d rather, you know, do this, you know, it’s funny we’re getting personal here.
No, I love, I love the person.
Everything I do in this job, everything I do in this job I once did for free.
Yeah.
I used to write newsletters.
Gave it away for free.
I used to analyze charts, gave that away for free.
Well, wait, so tell us Jared how you a got into journalism.
But b got into financial journalism specifically, I was, I was trading 20 years ago.
It was 2005, 2006 things were really boring.
S and P 500 was traveling like a few basis points every day.
It was doing nothing and everybody’s looking for some excitement in the market and then we start getting these reports in 2007.
And strange things happening in August and Goldman Sachs is trying to cover their housing position but you’re just hearing, hearing rumors, nothing was making sense.
And I knew, I understand the, I understood the few markets I was trading, but I didn’t really conceptually understand everything that was going on around me in the world.
You know, the world was kind of the financial world was blowing up.
So it was kind of a scary time.
I started researching it.
I started writing about it so I could understand about it.
And I started writing this newsletter, published it every day for a few years on your own.
Yeah.
And it got picked up.
It was a trading newsletter.
So I just, I wasn’t trying to, I was literally trying to write, OK, the market might do, do this on this report at this time, watch this level.
And that was, that was my, what about you?
And then it took off.
I mean, that’s really cool.
That’s what they say to do, by the way, for anyone who wants to be a content creator or anything else they say is the key.
Yeah, start doing it right.
Go on video, make your own videos, you on youtube, tiktok, whatever.
Yeah.
Take action guys.
This is your call to action.
Exactly.
Maddie.
How did you get into the biz?
I was always a reporter.
I studied journalism in college and then I was covering politics.
Uh and this was around 2016.
It was very, very intense time.
Yeah, I know we were, we were all in midtown together.
Um, and, and then, uh honestly, I was at New York magazine and they ended up calling their video team.
So I got laid off, ended up at Bloomberg.
Uh and they are much more.
It was a very good job.
I got pretty lucky.
I started the new job within about a week so I was able to double salary wise, which was really nice.
Um, and some career tips over here.
Yeah, I, I’d love to, I’d be thrilled if you guys will take me more often on the show.
Um No, but, uh, and then, you know, being at Bloomberg, just being a financial reporters kind of part of the game.
We started asking a lot of questions and learning as much as I could.
That’s what it is, ask a lot of questions and try to do it.
We have a couple of minutes left and I want to get from each of you.
So my personal thing is that no matter how much I try and teach myself about options, I cannot seem to understand it.
And I want to know from each of you.
What is a financial uh term or, or asset or something that you just cannot under you, you guys, I can understand anything.
OK?
I want to hear something that you str like not that you don’t understand today, but maybe that you struggled when you were young.
OK.
There are things going on in market microstructure that I just have never been able to get the information on.
So it’s not even a matter of understanding, you know, a report that has come out that explains what’s what’s going on in market microstructure.
It’s just getting that information in the first place.
And I could probably sit down with some quant traders and do that, but I’ve never done that, not the quant traders, but I need to have a nice conversation and understand some things about market microstructure how, you know, like when this happens, when somebody actually puts in one of these 32 different order types, exactly what happened.
So I don’t even know what mark market microstructure is.
I am scared to ask, there’s gonna hopefully a little bubble will pop up and I’m gonna skip to Maddie because I’m scared, I think that’s a really good show Jared, but I, I would say kind of the same thing but in the bond market, uh I understand like broadly, you know, us treasuries for example, but I’m not great at like global bond markets and how like the German bonds trading at a certain level might impact, you know, how we think about the ECB and fed rate decisions in the US.
And like the global comparison of bonds is something that I think tells a really great story about how the health of the global economy is doing and I’d love to be able to, it’s a DEV area.
Yeah, we are winding things down here at stocks in translation.
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