The Monster Reversion That’s Still Happening

But it’s not like it happens overnight, or with great fanfare.

That’s why one of my favorite Warren Buffett quotes is, “Beware the investment activity that produces applause; the great moves are usually greeted by yawns.”

The Monster Reversion That’s Still Happening

This summer, I said the unpopular laggards would rise again.

Back then, everyone thought it was the “Magnificent 7” stocks and nothing else. The other 493 stocks in the SPDR S&P 500 Trust (SPY) basket were left for dead, not to mention small-cap stocks and most others.

But the laggards are now rising. It’s the monster reversion that’s still happening.

And it’s because of high stock dispersion. Or, because correlation collapsed.

“Correlation” is how one stock behaves relative to another.

When equities move together, correlation is high. When one similar stock zigs and the other zags, correlation declines.

In May, dispersion was high/correlation was low:

For illustration, here are each sector’s top and bottom stocks by performance through May:

Look at some of those spreads – they’re at or near triple digits!

It All Changed on July 11

Things began to look different in July.

The June consumer price index report paved the way for the Federal Reserve to begin rate cuts in September. But there was also a growing belief that a new presidential administration could be on the way.

These forces combined, and it all changed on July 11.

That’s when small-caps rose, mid-cap stocks sprang to life, and the “Magnificent 7” took a back seat for the first time in a long time.

Taking a similar look back at top and bottom stocks by performance since July, it’s a different story. Some of the best performers in the previous chart are now the worst:

Here’s the thing: this shift could still be in its early stages.

And that’s why powerful research tools are a must.

For instance, MAPsignals data has been all over Axon Enterprise, Inc. (AXON), which has jumped 86% since mid-August thanks to Big Money:

Then there’s Royal Caribbean Cruises Ltd. (RCL)…few stocks on Earth have seen such Big Money love:

These are not tech companies; nor are they all over the financial news.

And the folks who benefited from these huge rises were the ones who got in when things were boring…like back in the first quarter (when the “Magnificent 7” was in focus).

That’s where the Big Money is made.

Identifying What Others Miss

Having an evidence-based approach is so powerful. It helps you spot the signal within the noise.

Speaking of spotting winners, MAPsignals is all about identifying what others miss. And believe me, in 2025 MAPsignals’ can help you spot the winners “hiding” in plain sight.

If you’re a serious investor, Registered Investment Advisor (RIA), or a money manager looking for hedge-fund quality research, get started with a MAP PRO subscription today.