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Financials remains at the top, and Materials strengthened to #2 (it ranked #6 as recently as March). Consumer Discretionary moved back up to 3rd place. Info Tech dropped to 4th—the first time it has ranked below the top-three since October 2019. Health Care continued its trend of deterioration and is now the eighth-lowest-rated of the eleven broad sectors. Energy, Real Estate, and Utilities are the three-worst-ranked sectors—a distinction they have now maintained for roughly a year.

FINRA’s latest report shows a 72% annual gain in margin debt. Yet, in relation to the gain in stock prices, growth in Margin Debt is still well below the peaks of early 2000 and mid-2007—suggesting investors could take on considerably more leverage in the months ahead.

Housing-related groups have catapulted to the very top of our rankings. Several of these are among the top-ten performers of our 120-group universe. Despite the strong returns for these industries, our GS Scores indicate that this theme has even more room to run.

We understand the various rationale for the upward shift in equity valuations seen over the last quarter century or so. Unfortunately, wiping away all market history prior to 1995 does not make stock valuations appear significantly less inflated. 

The Group Selection (GS) Scores are off to a fantastic start in 2021, and the Select Industries strategy, which takes its cues from the Attractive range, has taken full advantage.

We don’t make much use of “Forward” EPS for the S&P 500 because analyst forecasts have tended to be hopelessly optimistic. But if their short-term projections are on target, when numbers for the current quarter are reported, 12-month trailing GAAP EPS will exceed the $139.47 pre-COVID peak.

The speculative peak for this market rally may have occurred in either January (when GameStop and other “left for dead” short candidates soared), or February (when indexes tracking the “newborns”—IPOs and SPACs—both peaked). But even if we knew that for certain, a major peak in stock prices could still be months away.

By our count, the current bull market is the 13th of the postwar period. The 88% gain achieved by the S&P 500 in less than 14 months already places this bull sixth in terms of cumulative gains. We considered it a hindrance that this bull commenced from higher valuation levels than any other in history. Instead, they seem to have provided a head-start. 

The reflation trade continued with higher breakeven rates and lower real yields, a favorable make-up for risky assets.

Economic numbers were red hot in April but a funny thing happened when the awesome data rolled in—bond yields actually went lower. Expectations have trended upward, and “whisper” numbers have set the bars even higher.

AdvantHedge was down 5.2% in April, in line with the inverse S&P 500 (-5.3%) but trailing the inverse Russell 2000 (-2.1%).

The Leuthold Core and Global Portfolios continued to perform well; the underlying equity strategies maintained solid gains. With a pause in rates, fixed income and alternatives were also positive contributors.

The rank-and-file rally we’ve seen since August took a break as the five Tech Titans (22% of the cap weight) regained their footing and contributed 40% of the month’s return. Is it a coincidence the ten-year Treasury yield had its first significant monthly decline since July? Most certainly not.

U.S. small caps have posted blockbuster price gains coming off the pandemic bear-market low in March 2020. We were curious to see how international small caps have performed since then, and launched this project to learn how this asset class has recently behaved in other regions.

Large Growth was the best-performing style box for April but it has underperformed nearly everything else YTD—most notably, Small Cap Value and our Deep Cyclicals Group.

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As the S&P 500 continues setting new records, so do our downside-to-median estimates. Once again, dramatically improving fundamentals could not keep pace with the index’s rise in price.

In April, Small Caps took a break from their ascent toward the long-term median of the Ratio of Ratios. Trailing earnings’ profiles are now exclusively “pandemic.” A downward bias on absolute valuations should start to materialize in the coming months.

With the first month of 2021 earnings in the books, our Up/Down ratio reads 2.75. As expected, the base-effect helped kick the ratio into rarified air. This vignette should produce 2018-like figures through the end of calendar-year 2021.

Read this week's Major Trend.