A weak finish to a good day was fitting action for a quarter that started extremely strong and finished in a confusing mess of rotation, reallocation, and liquidation.
Small caps jumped 1% to add to a solid day on Tuesday, and breadth was good, but market players wondered if this was just some window dressing action that will soon reverse the start of a recovery for some stocks that have been hit hard recently.
What was most notable about the action this quarter was how poorly the indexes reflected what really happened. All the major indexes ended with gains, but the Nasdaq 100 badly lagged the Dow. Growth stocks, reopening stocks, and many high-beta technology names were pounded. All the major speculative themes, except for bitcoin, faltered badly and groups like special purpose acquisition companies and electric vehicles went from leaders to laggards.
The action was an excellent reminder to traders to be cautious when there is too much euphoria. Many new market players have not experienced sharp corrections, but they had a taste of it this quarter if they had been playing the hottest stocks.
So now what? The big question is whether interest rate and inflation fears will bubble up again. Optimism about the reopening of the economy seems to be almost intentionally suppressed at times, but I expect to see market players embrace more positive sentiment as life returns to normal.
We can never know what lies ahead, but I'm confident that another round of excellent stock picking is in our future.
Have a good evening. I'll see you tomorrow.