A funny thing happened this week: The Dow Jones Industrial Average closed at its highest level in nearly 130 years.
And it’s not just the U.S. putting up records. Europe and Japan are hitting new all-time highs. Latin America and Southeast Asia are clocking fresh cycle highs. It’s been a global bull market, plain and simple.
But you wouldn’t know it from listening to investors. Or journalists.
So what’s going on here? Is this what a bubble looks like?
Or is all this skepticism — in the face of rising prices — exactly the fuel that keeps a bull market running straight into next year?
The Economist Strikes Again!
We like to follow magazine covers around here because journalists are exceptionally good at capturing whatever people are obsessing over — the fears, the hopes, the panic, the euphoria. Nobody spots the crowd’s mood swings better.
And few do it more reliably than The Economist.
Remember back in April when everyone thought the stock market was about to fall apart? The Economist called it the “Age of Chaos.” As it turned out, the following six months were some of the calmest, least chaotic, and most profitable stretches in market history.
Well… they’re back.
Literally the day after the Dow Jones Industrial Average closed at its highest level ever, The Economist dropped this masterpiece:
I genuinely thought it was fake at first. They turned the guy’s skis into giant red down-arrows… while they’re still strapped to his feet. And he’s upside down with his head buried in the snow.
Oh, and don’t miss the map of the earth on his butt. Truly inspired.
Here’s the thing: When The Economist gets this pessimistic, it usually pays to take the other side. I’ve been tracking these covers for decades. I probably have one of the best collections of contrarian magazine covers on the planet.
If someone has a better one, I’d love to compare notes.
What’s unusual this time is when this cover showed up. You normally see these doomsday specials after major corrections — not the day after the U.S., Europe, and Japan all hit fresh all-time highs.
But remember: We have been in a correction, even if just a stealth one. It all comes down to time horizons.
Take the NYSE Composite, for example. The percentage of stocks in uptrends (above their 200-day moving average) actually peaked back on September 11. That was more than two months ago.
Since then, we’ve seen some churn under the surface. Not weakness. Just rotation.
About 60% of NYSE stocks remain in uptrends, which is perfectly consistent with a healthy bull market. But leadership has been shifting, and people with too much concentrated exposure to the former leaders don’t like that.
And here’s where people always get confused: Sector rotation is not breadth deterioration. New groups stepping up while former leaders catch their breath is exactly what bull markets do.
Just look at Energy and Healthcare. They’re breaking out every day while other areas consolidate. That’s not weakness. That’s a baton handoff.
Half the Individuals Are Bearish
Every week, the American Association of Individual Investors (AAII) asks its members whether they’re bullish, bearish, or neutral on the stock market over the next six months.
This spring, they logged the longest bearish streak in the survey’s history — right before one of the strongest stock market rallies of all time.
And here we are again.
Despite this global bull market ripping to new highs, half of individual investors say they’re bearish on stocks over the next six months.
You can’t make this stuff up:
This doesn’t scream “euphoria.” It screams the absence of it. In true bubbles, everyone believes prices are going higher… right up until there’s no one left to buy.
But when half of individual investors are outright bearish — and The Economist is warning you that markets are about to topple the global economy — it sure looks like there are still plenty of buyers waiting in the wings.
So what’s the plan?
We stick to our plan.
How should we be spending our time? Hunting for stocks to sell… or hunting for stocks to buy?
Money has been rotating for months — nothing new there. And we’ve been buying the areas that money has been rotating into.
We did it last week. We did it again this week. We’ll keep doing it.
At TrendLabs, the process is simple: Do more of what’s working. Do less — or none — of what isn’t.
We don’t own any of these quantum or AI names everyone is crying about on Twitter. So we couldn’t care less.
We’ve been buying Healthcare and Energy — the groups no one wanted — and they’re working.
Because while everyone else is busy panicking, debating, and doom-scrolling, we’re over here doing the only thing that actually makes money in a bull market: buying strength.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs