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<h2>Measuring bellwether leadership...</h2>
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<p>Historically, there are certain stocks that have reliably led the broad market averages at major market tops. These stocks tend to lead for a variety of reasons, including sensitivity interest rates, underlying economic conditions, or consumer spending.&nbsp;&nbsp;In order to capture the potent signals from these stocks in the lead up to a bear market, we compiled these stocks into a composite known as the InvesTech Bellwether Index.</p>
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<p>Underperformance in our Bellwether Index relative to the S&amp;P 500 Index is often an important warning flag that either a steep correction or a bear market lies in wait.&nbsp;Negative divergences in this Index can be clearly seen prior to the popping of the Tech Bubble in 2000 and the Great Recession in 2008.&nbsp;Other instances of underperformance in this Index, however, become more apparent when viewed from a relative basis.</p>
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<figure class="wp-block-image size-large is-style-default"><img src="https://ns2020-investech.investech.com/wp-content/uploads/2021/04/Bellwether.svg" alt="" class="wp-image-7352"/></figure>
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<p>The chart below quantifies when the Bellwether Index is lagging behind the S&amp;P 500.  When the Bellwether Index has underperformed the S&amp;P Index by -10% or more within a 12-month period, it has led to a bear market (or near bear market) every time since the Index's inception, in addition to a -19.8% correction in 2018. Note that poor relative gains in the Bellwether Index prior to both the 1987 crash and the 2020 COVID crash become obvious when viewed from this perspective. In practice, investors should exercise caution either when the Bellwether Index is visibly diverging from the S&amp;P 500 or when the Bellwether Index’s relative drawdown falls below -10%. In both cases, it could be a sign that the bull market is on its last legs.</p>
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<figure class="wp-block-image size-large"><img src="https://ns2020-investech.investech.com/wp-content/uploads/2021/06/Bellwether-Relative-Performance-1.svg" alt="" class="wp-image-8648"/></figure>
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