Stocks may be setting new records, but many investors have gotten burned by being on the wrong side of overcrowded trades.
Part of the reason was what some market watchers call a simple "reversion to the mean," a reference to market conditions generally returning to longer-term norms over time. Sectors that got ahead of themselves in November and December are falling prey to gravity.
Since the new year, companies that performed best between Election Day and the end of 2016 are the worst performers in 2017, with a 0.02 percent drop heading into this week, according to Bespoke Investment Group. Conversely, the stocks that performed worst from the election to Dec. 31 have been the best so far this year, with a 4.6 percent gain.
"What's happening right now is people are just really digesting how much the economic impact the policies are going to have," said Michael Yoshikami, CEO of Destination Wealth Management. "The market got overly enthusiastic."
The market performance is in good measure due to five trades that quickly became overcrowded: