A Sign That We Hit a Bottom

A Sign That We Hit a Bottom

Welcome to the only time in – at least my life – that the date will be 2-2-22. I’ve always found some fascination with dates and times that are unique to a century. It has been a somewhat unique numerical exploration of mine. I also find that I vividly remember a variety of dates and where I was on those occasions. 

Perhaps the most notable came in 1990. I was in Chicago with my father and brother. We had attended the final game that the Baltimore Orioles played in Old Comiskey Park. We entered the stadium for the game at around 12 pm. About a half-hour later, I turned to my brother’s friend and said, – “In a few minutes, it will be 12:34 pm and 56 seconds, on July 8, 1990.” 

The timestamp was: 1.2.3.4.5.6.7.8.9.0.

Every time that I have seen my brother’s friend since that date (and I was nine when it happened), he brings that up. So, I hope that you find fortune today at 2:22 pm and 22 seconds on 2/2/22. 

Timestamp: 2.2.2.2.2.2.2.2.2.

A Sign of Good Fortune

As I’ve noted, investors have eyed a bottom in the market since the broad selloff in tech started back in November and culminated with a dramatic slump during options expiration week in January. After a clear sign that we hit a bottom, there are two ways that we can identify a turnaround. 

The first would be a dramatic change in policy by the Federal Reserve around interest rates. I’m on the record stating that the Fed is not going to change course (barring a complete crash in the markets or a dramatic uptick in unemployment.) The Fed, however, is aiming to cut inflation and prevent runaway wage growth, an effort that might push us into a long overdue recession in the coming quarters. 

The other signal for a turnaround would come from the only group of investors one needs to follow: Corporate insiders. During the height of the 2020 crisis, insider buying swelled. The CEOs, CFOs, and other executives effectively swooped in and gobbled up their company’s stock. I have been looking for a similar wave of buying after we saw the strongest level of corporate selling in 2021. A collective mass of insiders… all buying at the same time.

Well, wouldn’t you know it. The buying strength of the five days last week hit the highest levels since March 2020. The top chart from SecForm4.com tells us that recent buying (the blue) line is at the strongest level that we’ve seen back to March 2020.

Hedge funds are buying stocks too, effectively arguing that the recent downturn had reached oversold territory. 

Clear Sign That We Hit a Bottom

It’s very easy to dismiss this data, especially given the nerves that are frazzled in the wake of a selloff. But time and time again we see that this is one of the sure signs of mass optimism and hope that the worst has subsided. Simply put, it’s time to start putting some cash back to work. 

Momentum should return to the market in the coming days, but it’s fair to be wary about small-cap stocks and lower capitalizations due the speculative nature of these asset classes.

Investors might want to look to larger companies like BlackRock (BLK) and the community banking sector (if you must do small-cap) as viable entry points for the months ahead. 

With rate hikes likely coming as soon as March 2022, investors should look for the companies that benefit the most. The banks are long overdue for a solid run.

Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.
Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.

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