Market thoughts:
Equity Markets have continued to run nicely in the last month. Back-drop wise, we did get tariff delays announced by Trump on the back of which markets rallied but there is still more than enough to be worried about with regards to the US economy (and the market!) If the tariffs eventually proceed as intended by the Administration then the average American and SMB will hurt a lot.
On-shoring manufacturing is not easy and the fact remains that the cheap Labour and willingness to work 9-9-6 by those in the East is never going to be matched by those in America. We also got an inflationary print and reduction in GDP so stagflation is a risk.
I had said last month that 5750 would be my “Sell in May and go Away number” and I did raise around 17/18% cash at that level. When we got 7/8% above the 50SMA recently, I upped this to 23/24% cash which is my current allocation. I am no longer of the opinion we have to adopt a Bear market Strategy and in fact open to the fact we are entering a new up-trend.
Indices:
S&P 500:
Currently trades at 5,888.85. It is +0.34% YTD
It is 5% above the 50SMA. RSI is 60.01.
Trading at 23.69x trailing earnings and 22.12 forward earnings (per WSJ)
Nasdaq Composite:
Nasdaq Composite is at 19,100.94. Despite the vicious bounce from lows it is -0.93% YTD.
It is 8.5% above the 50SMA. RSI is 63.38.
Trading at 31.25 trailing earnings and 27.47 forward (per WSJ)
Other Indicators I like to look at:
10 Year T-Note: 4.477%. Only -2.14% YTD and barely budged.
CPC (Put to Call Ratio) is 0.8. >1 usually indicates Fear and >1.5 can be Extreme.
Vix: 19.31. Note we did get >60 in the recent pullback. Below I have a chart showing the Vix over time and Nasdaq Comp underneath it: you can see extreme readings always have been a buying opportunity in medium term.
British Pound vs USD: 1.347 and up 8.94% YTD! $ is weakening significantly.
Fear and Greed Index currently at Greed and is reading 65.
Current Positioning and Holdings in size order with commentary: