How Billionaire Investors Look at the Market

Doc's note: In June, the S&P 500 Index officially entered a bear market when it closed 21% down from its January high. But this year's rough market has worried investors for much longer. However, not all are worried...

In today's issue, Marc Chaikin explains the secret behind why billionaire investors were better prepared for a bear market and why you should stop worrying about the ups and downs...

Many investors began worrying about a crash earlier this year...

And Russia's invasion of Ukraine in late February amplified those fears.

The S&P 500 Index lost as much as 13% from the beginning of 2022 through early March. That put the benchmark index in "correction" territory for the first time since the early days of the COVID-19 pandemic.

It makes sense... Folks typically start to panic when the "overall market" falls. They ignore all the tidbits of news along the way. And they don't react until the declines start to make headline news.

In other words, they're only looking at what they consider the "big picture" in stocks.

That's how most regular investors and the mainstream media think and talk about the stock market. They'll say that "stocks are up" or "the market is down" as if it's all one big entity.

You'll notice that many folks swing from euphoria to panic depending on whether "the market" has a good or bad day, week, or month. They're wrapped up in their emotions as if it were a sporting event.

But that's simply not the best way to invest. It's not the way most professional investors see the market. And it isn't how I have seen the market during my 50-year career, either...

Since the day I started at Wall Street brokerage Shearson, Hammill in October 1966, I learned to dismiss this idea of a uniform entity moving either up or down.

Plain and simple, the stock market isn't just one big thing.

It's actually a multitude of different, smaller things...

I'm talking about groups like energy, materials, industrials, utilities, health care, financials, consumer discretionary, consumer staples, information technology, communications services, and real estate.

And you can break them into even smaller groups, too.

The problem is, this makes for too many moving pieces. That's why many regular investors just completely ignore the idea.

Instead, they'll only think of "the market" in terms of the S&P 500. And a lot of folks keep track of how the Nasdaq Composite Index is doing so they know what's happening with "tech stocks."

This mindset is also how most folks invest... They just buy stocks. They're more focused on individual-company metrics like earnings reports, growth projections, and details like that.

That's actually a big mistake.

You see, investors could set themselves up for greater success if they followed a different approach...

Studies have proven that 50% of a stock's performance can be attributed to its industry.


That means choosing the right industry is literally half the battle when deciding which stocks to buy and which stocks not to buy. If investors know which industries are doing well and which ones are struggling, they can get a head start on finding the best opportunities.

This mindset directed nearly all of my buying and selling decisions while I was on Wall Street.

Whoever could see the biggest threats and opportunities in the market first – and correctly determine how they would ripple through specific industries – had a huge advantage.

This is how billionaire investor George Soros looked at the market when I worked with him...

He passed it down to the great Stanley Druckenmiller, who also worked with Soros before starting his own hedge fund. Even Bill Gross, the former manager of the biggest bond fund in the world, uses this approach.

Other big-name wealth managers operate this way, too. Citadel and Impala Asset Management were both in the top five best-performing funds of 2021... And they both look at the market this way.

The famed Medallion Fund does this as well. And it's one of the most successful hedge funds of all time – if not the most successful. The Medallion fund has reportedly generated average annualized returns of 66% before fees since 1998, delivering nearly seven times better returns than the overall market.

What's Medallion's secret? The fund's managers don't pay attention to specific stock stories.

Instead, they search for elusive patterns across specialized groups that regular investors simply aren't looking for. Medallion is pretty open about this secret to its success.

My point is... this approach is how I learned to invest throughout my five decades in the business. And it's how I manage my own investments to this day.

For the most part, I don't worry much about the overall market. I don't watch every move of the Dow Jones Industrial Average or the S&P 500. I almost exclusively track industries.

But most investors are left in the dark when it comes to this approach. They're simply too focused on the hot stock pick of the day.

That means lots of investors are in trouble.

Earlier this year, I predicted that a massive shift was headed to the markets by the end of 2022.

Today, that prediction is quietly coming true. And your window of opportunity to take advantage – and most importantly, protect yourself – is now razor-thin.

If you've lost money in recent months or weeks... If you've watched stocks soar one day only to crash the next, and wondered – how are we going to get off this rollercoaster?

This is a moment you'll likely look back on in one year... five years... and even 10 years – and feel either intense relief or intense regret.

Click here for all the details on what's coming and how to prepare.


Marc Chaikin