The Pros Got Crushed… What That Means for You – Fat Tail Daily

When the smartest people in the room are down 30% since the start of the year, you realise markets have entered a new phase.

Australian hedge fund performance

Source: The Australian Financial Review

From the results above, it appears their investment strategy involved piggybacking all the other hedge funds into software stocks and riding them higher without proper risk management.

Looks like bonus cheques this year could be a little light.

So even though we’ve just witnessed an almighty rally, with the S&P 500 up an astonishing 15% in 11 days, there are still areas of the market that are struggling.

Personally, I don’t trust this run-up and think it looks like a classic short squeeze.

And yet I have sent a recommendation to buy a couple of stocks recently in my Retirement Trader service. Some areas of the market look like a buy while others don’t.

Beaten-up software stocks are actually looking ready to run with some strong buying coming into them over the last week.

Sifting through the wreckage to find the diamonds has been my job over the last few months. I am preparing to go into a bunch of software stocks that are least likely to be disrupted by AI.

But make no mistake, the last six months have been tricky to navigate. So if you have been knocked around a bit, you’re not alone. As long as you haven’t dusted 30% of your capital like the masters of the universe above, you should be able to carry on.

Charlie and I consider the vertical rally in US stocks and the underperformance in Australia, then have a look at the nascent rally in software stocks.

We also look at the accelerating run in lithium, pointing out one that’s bringing a mothballed mine back into production shortly.

To finish off, we survey the incredibly strong charts in the robotics sector. A major breakout looks in the offing.

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