April Strategy Session: 3 Key Takeaways

April 5, 2024

From the desk of Steve Strazza @Sstrazza

We held our April Monthly Strategy Session earlier this week. Premium Members can access and rewatch it here.

Non-members can get a quick recap of the call simply by reading this post each month.

By focusing on long-term, monthly charts, the idea is to take a step back and put things into the context of their structural trends. This is easily one of our most valuable exercises as it forces us to put aside the day-to-day noise and simply examine markets from a “big-picture” point of view.

With that as our backdrop, let’s dive right in and discuss three of the most important charts and/or themes from this month’s call.

1. Commodities Over Stocks

Commodities are back on investors' radar as participation expands across the asset class.

When we compare them to stocks, a multi-month relative trend reversal is playing out in favor of commodities.

Here’s the Dow Jones Industrial Average versus the Thomson Reuters CRB Index going back to 2019:

As you can see, the ratio retraced 38.2% of the entire decline from the 2020 highs before rolling over in recent weeks.

We believe we are in the early innings of a second major run for commodities, and thus, we expect to see them outperform their alternatives for the foreseeable future.

2. Rising Rates Persist

US interest rates continue to rise across the curve.

Below, we have a long-term look at the US 10-year Yield to depict this theme:

Notice how, in 2022, rates broke out of a multi-year base, ending a historically low interest rate environment.

Today, the story is different as rates are on the rise, and the structural trend is undoubtedly higher.

As long as this is the case, we want to stay away from bonds and focus on areas of the market that are best during a rising rate environment.

3. Energy Back On Top

With the first quarter in the books, sector rotation is the big theme for US equities.

Here is the quarterly performance of all the large-cap sectors.

Notice how energy went from being the worst performer in Q4 2023 to the best in Q1. The Energy Sector SPDR $XLE has already booked about a 16% gain on the year.

Meanwhile, many former leaders like Technology and Consumer Discretionary have lagged so far this year.

This speaks to healthy sector rotation, which is the lifeblood of any bull market.

Those are some of the main takeaways from this month’s strategy session.

Thanks for reading, and please let us know if you have any questions!

Allstarcharts Team