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S&P 500 profit margins mask the disparate trends taking place on a sectoral level. We dissect those trends with the ten major sectors grouped by five broad themes: Cyclicals, Commodities, Defensives, Interest Sensitives, and Tech/Telecom.

After the last couple months’ strong surge, risky assets are entering a seasonally unfavorable period, with Brexit looming particularly large in the near term. We still favor higher quality credits within fixed income.

Air Freight & Logistics, Commercial Services, and Electronic Manufacturing Services caught our eye this month.

More spread compression is likely ahead.

The first month of 2016 earnings reports registered a pathetic Up/Down Ratio of 1.27. With all the talk of large year-over-year earnings declines, this figure is not much of a surprise.

After nearly seven years of relatively high Small Cap P/E ratios, our Ratio of Ratios has now spent five consecutive months below its long-term average Small Cap premium of 4%.

Value stocks finished ahead of Growth within all three market cap tiers in April. Our Deep Cyclical group, all but forgotten for the last few years, has been on a relative hot streak compared to Large Cap Growth.

Apple lost $84 billion in market cap (roughly the value of Starbucks) for the month of April. The firm now sits 32% below its all-time market cap high of $750 billion set in May of 2015. Apple’s fall, and increased market participation, have boosted returns for the Equal Weighted S&P Average.

Riding a major upswing in the Momentum/Breadth/Divergence category, the MTI moved to positive for the first time in almost 10-months. Tactical Funds’ net equity exposure increased to near 55%.

The S&P 500 gained 0.3% (price only) in April.

Our AdvantHedge gross composite fell 2.6% in April, lagging the inverse performance of the S&P 500 (+0.4%), NASDAQ (-1.9%), and Russell 2000 (+1.6%).

Select Industries gross composite fell 1.4% in April and is down 2.1% YTD.  Global Industries (based on Global Industries, L.P. gross return) fell 1.4% in April and is down 3.0% YTD.

Major Trend Index Positive: Net Equity Exposure Increased To 53%

Similar to March, Value was the only factor to perform well in April. Profitability, Momentum, and Volatility all had spreads worse than –5%. 

Based on data through the week ended April 22nd, on the back of a 100-point gain in the Momentum/Breadth/Divergence category, the Major Trend Index pushed a bit further into positive territory, rising 0.03 points to a 1.13 ratio. Leuthold tactical portfolios remain positioned with net equity exposure of 54%.

The Major Trend Index returned to bullish ground based on data through the week ended April 15th, rising 0.07 to a ratio of 1.10. While it’s a struggle to put together a compelling fundamental (and especially value-based) argument for U.S. equities here, we can’t ignore the improvement in the MTI and related models used for reinforcement. But prices move ahead of fundamentals, and perhaps the work is discounting better times in the months ahead (rebounding earnings?).

The Major Trend Index fell 0.01 to a ratio of 1.03 based on data ending April 8th, with moderate gains in the fundamental inputs (Valuation, Economics) offset by losses in components related to market action and investor psychology.

While net cash flows were negative for equity funds through February 2016 (not too surprising given the sharp equity market sell-off), bond funds collected net cash inflows.

Our AdvantHedge gross composite fell 8.9% in March, lagging the inverse performance of the S&P 500 (+6.8%), NASDAQ (+6.9%), and Russell 2000 (+8.0%).

Select Industries gross composite gained 6.4% in March and is down 0.7% YTD. Global Industries (based on Global Industries, L.P. gross return) gained 7.5% in March and is down 1.6% YTD.