The macro environment has a goldilocks feel to it, in that:
Investors have been willing to take risk, but mostly in those areas that have performed best and are less exposed to riskier economic areas, reinforced by the ongoing COVID-19 crisis. A just-published MRB report examined the hottest investment theme, namely U.S. growth stocks, where excesses have been building rapidly.
The report continued our thematic series on profiling asset manias, and focused on growth stocks, which have benefited from several major macro themes and related asset mania trends since the Great Recession. However, many of these supporting trends are either maturing and/or now well discounted. We expect that the catalyst for a reversal will be the next global recession and equity bear market. For now, we recommend using strength to scale back positions, and use trailing stop-shorts on growth stocks to catch the eventual downturn.