It all depends on your perspective. If you owned a bunch of laggard stocks at the market low you have been climbing the stairway to heaven. If you owned the high relative strength stocks it’s been another story. The performance by relative strength decile from the market low through May 18 is striking. It’s a perfect stair step - it’s also highly unusual. Generally, this graph would show a progression up to the right, not up to the left like it is now. This just indicates how well the laggards have performed during this rally off the bottom. If you owned anything in the top 6 deciles, you underperformed on average!
What would you have had to own to get the out-sized returns from the laggards? A bunch of stuff that everyone thought was about to go out of business. Here is a list of the top 10 gainers from our bottom decile:
I’m sure you all owned a bunch of those!
These out-sized returns from the lower deciles are rare. Either the laggards will run out of gas and return to under-performance, or they will keep going and become the leaders. If you are buying high relative stocks it has been a tough environment since the low, but it can’t last forever.
