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Someone forgot to tell commodity trades this is an era of diversity of inclusivity: This year’s leap in the S&P/Goldman Sachs Commodity Index has been entirely the result of its heavily-weighted energy inputs.

U.S. stock funds have seen heavy outflows despite the market’s YTD gains of 15-20%, once again reviving the tired characterization of this bull market as the “most hated in history.”

Confidence in the U.S. economy’s health reached a new peak with the April employment report, with a blowout number for nonfarm payroll coinciding with a soft wage print.

The market’s four-month recovery from the brink of a bear was completed in April, and the ten-year-old bull looks better than ever against all of its post-World War II competitors.

Similarities between 2019’s YTD up-move and the late-2018 recovery are so striking they must make even the most vociferous bear queasy. The trends are identical, but the magnitude of both the absolute and relative performance movements was greater in the earlier experience.

The Major Trend Index has remained in neutral territory during the last several weeks of upside action, suggesting there remain significant fundamental and technical shortcomings beneath it all. But this precarious MTI stance didn’t preclude us from acting on a new bullish reading for Emerging Market equities at the end of April.
 

The U.S. economy and blue chips have shrugged off the risk of the worst trade war since 1930’s Smoot-Hawley Act, while comparatively few stocks on either the NASDAQ or the NYSE have broken out to 52-week highs. There’s also the troubling talk of the Fed having tamed “the cycle.” Should investors bet on a potentially wild (but narrower) final melt-up over the next 6-12 months? We don’t like the odds.

Beware of those who write about stock market history, especially when they speak of cause and effect. The truth is that the “why” can never be known.

In the span of 146 trading days, the index experienced a -20% trapdoor followed by a +25% rocket ship—bringing us right back to where we started. Microsoft has become the second firm in the S&P 500 to reach the $1 trillion market cap threshold.

The Leuthold Core and Global Portfolios both lagged their respective 100% equity benchmarks in April as the underlying equity portfolios lagged in a strong up market.

What else is new, right? Growth has been a rocket ship to Value’s tricycle the past nine quarters. The valuation work has shown Growth stocks overvalued relative to Value for some time, but that doesn’t seem to be stopping the performance trend.

Our Ratio of Ratios has now spent six consecutive months in the Small Cap discount zone—matching the duration of the only other contemporary discount streak set back in 2016.

Our Up/Down Ratio reads 1.52. As expected, the impossibly-high earnings growth rates of 2018 have reached from the grave to pull 2019’s figures down. 

Read this week's Major Trend.

Our Risk Aversion Index ticked lower in April and stayed on the “Lower Risk” signal. Most risky assets participated and the rally was broad-based. The only fly in the ointment is EM assets. The recent weakness in both Chinese stocks and the Yuan is certainly worth paying attention to.

Banks’ lending standards for C&I loans (typically to large businesses) tightened quite a bit in Q1, which bodes ill for both investment and overall economic growth going forward.

The top-three rated sectors are Information Technology, Communication Services, and Consumer Discretionary.

For the first time since late 2017, Information Technology moved into the top-rated spot. This sector has historically produced especially strong results during periods after which it took over the #1 seat.

Signs of spring are popping up everywhere in the Financials sector. S&P Financials was easily the top- performing sector in April and several sub-industries have been bubbling higher in our Group Selection discipline.

In prior publications we’ve written about corporate leverage, which has risen to an alarming level, and we’re concerned that this could be a trigger for the next market downturn.