U.S. Equity indexes hit all-time new highs last week, although it may be interesting to note that only 70% percent of members within the S&P 500 are participating in the rally compared to 85% since January. It’s surprising to see the short-term Trend and Breadth Confirm model stuck in neutral because it should be positive with the S&P hitting new highs. Despite the recent strength, it seems some investors are not convinced due to heightened political uncertainty.
The Nasdaq Composite index gained 2.08% last week and is leading with a 15.36% YTD return. The MSCI EAFE index (Developed International) is the next leading index, up 14.41% YTD.
In economic news, first quarter GDP was revised from 0.7% to 1.2%, almost a double. Fed officials are pointing to a June rate hike (due June 14th) and are talking up their strategy to reduce the balance sheet. By not reinvesting proceeds from bonds that mature, their signaling that a slow and gradual reduction over the long term shouldn’t upset the market. Between the two (raising rates and not reinvesting into new bond issues), interest rates should gradually rise. This means a tactical bond strategy to your bond sleeves will become very important with the Fed leading interest rates higher.
On Thursday this week (see attached), please join Dean & I for a live video webinar as we outline our initial findings on the surprise announcement from the DOL that the Fiduciary Rule will begin next Friday on June 9; albeit in a limited fashion until full compliance begins on January 1st.