The Stock Market Is Like Picasso’s Cubist Period

 | Apr 10, 2023 02:18AM ET

Picasso is known as the father of cubist painting. He and others used geometric shapes and patterns to represent a specific form.

Cubism, in Picasso’s mind, was created to emphasize the different ways of seeing the world around us.

Picasso painted cubes and shapes using the concept of relativity while employing multiple perspectives.

The market in 2023 feels like a cubist painting.

The different indices and sectors relate to one another with a similar concept of relativity and multiple perspectives.

And clearly, these multiple perspectives have distorted reality and perception, yet still are recognizable.

h2 Using the timeframes within business cycles: Expansion, Peak, Contraction, Trough/h2

Some sectors/indices are in expansion; some sectors/indices are in contraction — while others are more stagnating or not quite expanding nor contracting.

Nothing appears to have peaked yet, and possibly some areas may have seen their trough. Even in terms of inflation/disinflation, the same cubist analogy holds true.

Some areas look more disinflationary, while other areas look more inflationary.

In other words, everything is happening at the same time, which defies the logic of fitting the market or economy into a symmetrical box. Or, trying to fit a round peg in a square hole.

How do you invest at this time?

The areas in expansion are in growth and chip stocks. The precious metals, and many industrials are as well. (Dow Jones Industrial Average ETF Trust (NYSE:DIA) closest to breaking out with Invesco QQQ Trust (NASDAQ:QQQ) second.)

A few areas in contraction are the regional banks, discretionary retail, small caps, and in energy, natural gas.

Sectors/Indices in stagnation, perhaps the most difficult to predict next move- can really be seen in the S&P 500, transportation, and oil.

The same is true with inflation and disinflation.

Some areas of disinflation can be seen with the recent ISM and PMI numbers. Housing and labor patterns tend to support disinflation.

Yet, inflation has not gone away, especially if one considers the falling yields and dollar. We have seen a massive rally in sugar, coffee, gold, silver, and metal miners.

Looking for signs:

Thursday, the S&P Regional Banking ETF (NYSE:KRE) showed signs of a potential double bottom (a trough).

KRE held the March low as this past week the price came close to that low yet held closing green for the day. (Although still red for the week.)