Matt Maley On How To Profit When The Market's 'Dead Wrong'

Miller Tabak's chief market strategist Matt Maley is a master of identifying trends and opportunities.

The most notable takeaway from his recent Benzinga Stocks & Options 101 Boot Camp presentation: the era of holding an index fund and sitting back is over.

Fortunately, Maley said investors will be given opportunities to score returns equivalent to singles, grand slams and everything in between.

Maley On The Biggest Wall Street Myth: One of the oldest Wall Street cliches is "the market is always right," Maley said.

This happens to be the "worst saying of all time" and should be corrected to the "market is only always right ... eventually," he said during a Boot Camp panel. 

For example, the market was "dead wrong" about tech stocks before the dot-com bubble, as it was with housing and financial stocks before the financial collapse, the strategist said. 

Most recently, oil traded in negative territory for the first time ever, and the market was just as wrong pricing oil near negative $40 a barrel, Maley said. 

In each case, the market was wrong by missing the rebound. So what does all this mean for investors?

When markets are wrong, investors and traders can profit and the returns can vary based on how wrong the markets are. The bigger the dislocation, the bigger the returns.

"When everyone is on one side of the boat, you want to be on the other side," he said. "That's where you are going to make the biggest money."

When The Market Was Wrong: Investors and pundits were quick to declare the end of Apple Inc.'s AAPL ability to innovate around June 2019. Instead of following the crowd, Maley said he was looking at the broader "macro picture" that was indicating a market uptrend despite zero earnings growth.

Similarly, the market was wrong in early 2020 when it wasn't worried about the COVID-19 pandemic, he said.

The main error in this thinking is that the market is "priced for perfection," Maley said. 

Importance Of Lumbar, Plastic Prices: Maley looks at the price of lumbar daily because of its importance to the housing market and broader economic outlook. 

Moving lumber prices could be a predictor of what will happen to housing stocks, many of which showed returns that rival tech stocks.

Similarly, investors may want to pay attention to pricing and trends in plastics coming out of Asia, Maley said. Plastic is a great leading indicator for chip and semiconductor stocks.

"You want to look at all of these correlations."