Halfway through the year 2021, we must be reminded to “not confuse brains with a bull market.” These are the words we were taught back in the 1980’s. When all boats float, don’t think you are a genius because your boat floated. Investors in the S&P 500 Index, mega-cap tech stocks, momentum disruption stocks and a wide variety of success stories the last five years floated. The former kings of the stock market (active stock pickers) were pronounced dead. Goodbye Warren Buffett, John Templeton, Peter Lynch and all the others who were declared kings of stock picking.

The death pronouncements were in money flows, on magazine covers and all over the media which covers Wall Street daily. Stock picking was officially dead, and no brand of stock picking was deader than value stock picking. Look at the chart below to get a ten-year feel for how growth trounced value and notice how the spread in results exploded the last four years:

This has left us with an S&P 500 Index which is the most tilted toward growth stocks since the dotcom bubble in 1999-2000 and the most concentrated in the largest of these companies ever.

One of the beautiful things about the laws of economics and statistical mean reversion is the pendulum that governs long-duration common stock performance. When growth stocks get on fire, we believe they almost guarantee poor forward results over the following ten years. Look at how this went from January 1, 1973 to August 9, 1982 and from March 9, 2000 to March 9, 2010:

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