Laggards Don’t Stay Laggards Forever

The Catch-Up Trade

As you are probably aware, markets don’t move in straight lines. Even in a strong bull market, there are leaders and laggards. The laggards often hold the best catch-up potential. That’s why I’ve built a new basket, focused on high-quality companies that for one reason or another, haven’t kept up. The Laggards Basket is designed to capture that asymmetry.

The thesis is simple:

If/when the market grinds higher into year-end, the incremental dollar is unlikely to keep chasing the same narrow leadership. As breadth improves and the rally begins to broaden out, rotation into quality laggards could provide outsized returns relative to the market.

I will be putting this on at 8% weight with all names equal-weight.

Have a great end to your day,

Fed