It has certainly been a good one for equity bulls, with the S&P 500 closing out the shortened week ahead of the Easter holidays at a record high — above 4,000! It feels hard fought given the threat of higher bond yields and the resulting violent sector rotation beneath the surface, but we have now arrived nonetheless. With Q1 now behind us, investors will be looking ahead to determine their bets for the coming quarter.
We too are focusing on the future, with our newly updated Monthly Checklist Report for April available now to members of our Trading Club. Last month’s report helped us to identify some really interesting setups whilst cutting through the noise to focus in on the fundamentals that drive markets. Although a lot of the action in currencies was dominated by inflation speculation in the US treasury yield, it was business as usual in many other markets that we follow, including of course equities.
Whilst I cannot reveal the new scores here just yet (Trading Club members have immediate access) there has been an interesting change in the score for the stock market this month. Similarly, there has been a notable shift in the fundamentals for gold which will be another area of focus for us. And elsewhere in commodities crude oil is also looking interesting, particularly given the recent momentum.
I can reveal how our Business Cycle Checklist shows improvement this month, with the score increasing to +2.5. This validates the normalisation in interest rate expectations and also the new high in the S&P 500 Index.
This is certainly a tailwind for stocks longer term, but we should also consider the shorter-term tactical score in our US Equities Checklist if we are to believe in a continuation this month. Without being able to reveal the score for that just yet, I hope to share more with you in the coming weeks (and of course, with Trading Club members in real time each week).
One of the things which is looking very promising for the US economy and stock market is the ISM Manufacturing PMI. The survey showed another increase yesterday to a new high of 64.7 (60.4 previous) — the highest level since 1984! Whilst cynics may argue that the index is inflated due to base effects stemming from the nadir of the COVID shock a year ago, history suggests that for equity investors optimism is more often rewarded over pessimism in the long run.
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Have a great weekend,