The US stock market had a strong week with the S&P 500 Index returning 0.85% and the Nasdaq Composite Index gaining 1.82%. The positive movement came amid a positive earnings week and comments from Treasury Secretary Steven Mnuchin that tax cuts will be revealed this week.
Money Market ranks 35 out of 100 for relative strength (see ETF Quickview) with U.S. Equities (large-cap, mid-cap, and small-cap) leading the pack.
Developed markets are coming on strong as professional money managers look to diversify into more reasonable valuations from expensive U.S. equities. The average P/E ratio for the stocks of the S&P 500 are trading at 23x earnings. Low interest rates have driven up valuations to levels not seen since 2000, yet record inflows continue, supporting prices across the board.
In the chart attached you will see that that the NYSE Daily Advance-Decline Indicator shows no underlying weakness and continues to be bullish on a long-term basis. Thank you Barry for giving us this insight!
How long can this trend continue is anyone’s guess, however, it’s worth noting that investor behavior that is consistent at market tops, is spreading. Investors are pouring into major market index ETFs, margin interest debt hit an all-time record and passive investing versus active money management is in vogue. We’ve seen this movie before!!!
On a short-term basis, the market is still in a bit of a sideways pattern and remains neutral. However, with the French election over the weekend easing traders’ minds about a possible Frexit, the US Equity L/S strategy by the end of today will be fully invested. The S&P 500 L/S remains in cash.
Thought of the Day:
Opportunity is missed by most people because it is dressed in overalls and looks like work.” –Thomas Edison
AMEN, Thomas, amen.