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this year more than most people struggle with how to posture portfolio and they're mostly i think getting it very wrong looking forward because they're seeing the entanglement of two things that keep them from seeing the real thing and what do i mean by that what i mean by that is we have a feature going on which is almost perfect on days where the market is down fairly much i don't mean 10 20 basis points but down a notch it's the same categories regularly that are doing better and worse on the days when the market's up a good notch we have this reverse the categories that are doing worse on the downside are doing better on the upside the simplest and easiest one to see is tech which is all year long lag markedly on down days a hundred percent perfectly so no but the correlation there is very high on may 26 i did a visual scattergram with some data on this on my twitter feed and you can look that up from may 26th but the fact of the matter is all this year the data points reinforce simple notion said very simply that if the market was going up tech would be doing better than the market if the market was going down tech would be doing worse but you could extrapolate that much more broadly the extrapolation that's more broad and still fully valid is when the market's going up growth stocks are leading when the market's going down growth stocks are lagging the inverses when the market's going down value stocks defined as cheap relative to earnings or book value or dividends or some other valuation criteria ebitda or whatever value companies do better when the market's going down they're doing worse when the market goes up now here's the point that i want you to see when you have either a standard correction or the back end of a bear market either one the categories that lag the most on the downside not a hundred percent but close to bounce the most in the first few months when you get to the rebound so right now if you listen to media if you read so many sources they'll tell you this is the time for value well that's true if you believe the market's going to keep going down if you believe the market's going to go up this is exactly the time not to do value but instead to do growth because the categories that get pummeled the most on the downside as categories again not every single stock i'm talking categories here do the best on the upside my view is has been that this is a correction very elongated in time and fairly steep a lot like the 2011 correction that lasted six months got intraday down below 20 percent the official demarcation of a bear market but couldn't close there played with 20 for a good long time back and forth up to about 14 and back down to almost 20.
and then boom exploded on the upside after the six months right after the six month point and that the market behaved then in its aggregates like it's behaving now and i think for a lot of the same reasons and i may be wrong about all of that i may be wrong and it may not act that way moving forward but that's what i think we are having and in that i would expect that the parts that should lead on the way back up are growth tech the parts that should lag are value and the defensive stocks all the ones that have done the very best so far year to date as i speak
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