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Value stocks, recent underachievers, regained some lost ground in April. Large Cap Value was the month’s big winner—helped in large part by rallying energy firms. Large Cap Growth still leads YTD by more than 5%.

Gainers outnumbered losers by more than 2 to 1 for the largest 25 firms, while the overall market turned in uninspired results. Still, Q2 is off to a positive start for the S&P 500 as we look for the 10th consecutive quarter of gains for the index.

The common driver behind the sharp reversal of many recent asset class trends is the unwinding of the ECB QE trade.

Favor credits within fixed income in the near term but beware of volatility ahead

Municipals reduced to “Neutral.” Near term risk of higher interest rates stemming from European side is too hard to ignore.

The Major Trend Index jumped 0.07 to a 13-month high of 1.20 in the week ended April 24th, suggesting that last Friday’s new cyclical bull market high in the S&P 500 should be improved upon in coming months (despite our ongoing valuation concerns). Our tactical strategies remain positioned with net equity exposure of 58%.

The Major Trend Index dropped 0.02 to a still-bullish 1.13 last week, with losses in the Supply/Demand and Momentum work edging out modest gains in the Economic and Attitudinal categories. Net equity exposure in the Core and Global Funds remains unchanged at 58% following last week’s 3% increase, and the path of least resistance in the immediate term remains up.

The Major Trend Index rose 0.06 last week to a 10-month high of 1.15, led by a 95-point jump in the Momentum/Breadth/Divergence category. The improvement in the MTI and supporting analyses prompted us to cover a small (3%) short position in the SPDR S&P 500 ETF Trust, bringing net equity exposure in both the Core and Global Funds up to 58% from 55% a week ago.

Most of the factor trends that were in place at the end of 2014 have continued in 2015 thus far.

Health Care Distributors, Movies and Entertainment, and Cable & Satellite.

Despite this sector’s extended outperformance, we think this trend may persist in the near term as Discretionary industry groups look increasingly attractive within our group work. Keeping an eye on the Fed Funds rate is key, however.

We remain reluctant stock market bulls, with our disciplines supporting net equity exposure (targeting 55%) that “feels” too high based purely on instinct. We think our stay in the overcrowded bull camp will be short-lived.

While our disciplines continue to turn up enough bullish evidence to keep us cautiously positive toward stocks, we are seeing troubling signs by cyclicals (especially the Transports) and junk bonds.

Poor performance in 2014 by two typical victims of Fed tightening—Consumer Discretionary and Small Caps—corroborated our argument that “tapering” is tightening.

Oil’s 60% decline in the last nine months has been the headline-grabber, but the remaining components of the Continuous Commodity Index (CCI) deserve some love, too.

While there’s understandable obsession over the likely level of inflation (especially with the year-over-year CPI dipping below zero in the past two months), equity managers with no interest or skill in inflation forecasting might be better served by monitoring the character of inflation—i.e., whether it was led by changes in consumer or producer prices.

With negative nominal yields throughout Europe dominating the fixed income headlines, a very different development in the United States has failed to attract any attention: the emergence of positive real short-term interest rates in the past two months.

Consumer Confidence shot to new cycle highs in March, closing within 6-7 points of the peak made shortly before the Great Recession.

Will Rogers said, “It isn’t what we don’t know that gives us trouble, but what we know that ain’t so.”