Global Trends Get In Gear While US Breadth Struggles
Stocks have bounced but US equity market trends remain a headwind to further strength
Portfolio Applications update: The May update to our Systematic Asset Allocation Portfolios is available. Global equities are back to trending higher but still lag bonds on a relative basis.
On a global basis, more markets are making new highs than new lows.
The percentage of markets above their 50-day average has soared from the single-digits less than a month ago to nearly 90% (as of the end of last week).
While trend strength has returned to global equities, the trend environment in the US remains challenging.
The percentage of companies across the S&P 500, 400 and 600 with 50-day averages above their 200-day averages continues to collapse.
For the S&P 500, the 200-day average continues to fall and the 50-day average remains below the 200-day average. Historically this is an unhealthy combination for those looking for stock market strength.
Our industry group trend indicator has ticked higher but remains at a depressed level. This indicates that while breadth has stopped deteriorating, it remains weak.
While investors have been expressing bearish sentiment in opinion polls, their actual positioning shows that the shift away from equities has only just begun.
Zooming out, it is clear that two dominant investing paradigms of the the past decades are being challenged.
The persistent downtrend in bond yields is a thing of the past.
US strength versus the rest of the world is coming under pressure.
Successful investors will adapt to these changes rather than clinging to asset allocation models that fail to account for these new realities. This includes a willingness to incorporate gold as part of the asset allocation conversation.
Whether it is across asset classes or within asset classes, making the trend your friend is a great place to start. We keep track of this every week in our Relative Strength Rankings report.