The Dow, S&P, and the NASDAQ are up nicely this year. U.S. stocks have experienced a major rally off the Covid lows of March 2020. The market has not suffered a Bear market correction, typically defined as a 10% or more drawdown, since September 2020. We have not had a 5% correction since March of this year. While the U.S. economy is recovering, it is very important to keep in mind that the economy and stock market are two different things.
The major stock indexes are capital-weighted indices. This means that the larger companies in these indices move the indices the most. To determine the true health and sustainability of a bull market, one must dig a bit deeper. Small and Mid Cap stocks are not keeping pace with the major indexes. This is not a healthy attribute of a strong bull market. Fewer and fewer stocks are participating in this bull market. Historically, the last stocks to hold up during the final stages of a bull marker run are the large-cap stocks, precisely what is occuring at present.
With proposed capital gain tax hikes looming, a bull market that is long overdue for a correction, now may be the time to take some profits and have some cash ready for a good buying oppurtunity at a later date.
