From the desk of Willie Delwiche.

Key Takeaways:

• Lack of follow through evident beneath the surface
• Risk Off Environment persists
• Defensives gain strength while Value & Growth stumble

Last month’s equity market bounce was impressive at the moment. But it has failed to produce the sort of strength that argues in favor of a broadly-based “risk on” environment. Short-term upside surges have not been followed by breadth thrusts in our work. Despite a handful of days in which new highs outnumbered new lows, it has not been consistent. We are now at 20 consecutive weeks of more new lows than new highs and our 10-day net new high advance/decline line has been falling since November. Our weight of the evidence dashboard suggests a cautious approach remains warranted.

From the desk of Steve Strazza @Sstrazza

Our Top 10 Charts Report was just published.

In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.

A Tale Of Two Markets

2022 has been a tale of two markets. On the one hand, cyclical stocks have shown impressive leadership as they continue to trend higher and make new highs. But then there are growth stocks which continue to lag significantly as they struggle to find a bottom. While this trend is really nothing new, it has accelerated notably in recent months. The bubble chart below is a great way to visualize the dispersion in performance between these two groups of stocks. Whether the leaders catch lower, or the laggards eventually play catch-up is something we’ll have to wait and see. But for now, the two are moving in opposite directions. As long as this is the case, we want to continue positioning ourselves in the strongest groups while staying away from the weakest ones.

From the desk of Steve Strazza @Sstrazza

Check out this week's Momentum Report, our weekly summation of all the major indexes at a Macro, International, Sector, and Industry Group level.

By analyzing the short-term data in these reports, we get a more tactical view of the current state of markets. This information then helps us put near-term developments into the big picture context and provides insights regarding the structural trends at play.

Let's jump right into it with some of the major takeaways from this week's report:

* ASC Plus Members can access the Momentum Report by clicking the link at the bottom of this post.

Macro Universe:

From the desk of Willie Delwiche.

Key Takeaway:

• Global bond yields racing higher.
• Median CPI from Cleveland Fed is the key inflation report.
• April not living up to its ‘best month’ billing.

From the desk of Willie Delwiche.

The Fed was all over the news this week, going out of its way to telegraph to the market its intention to pursue an accelerated pace of rate hikes. Fed funds futures seem to be getting the message. A month ago, futures were priced for year-end fed funds rate of 1.50 - 1.75%. That is now up to between 2.50% - 3.00%. In past accelerated tightening cycles, both stocks and commodities were strong into the initial rate hike. Their paths, however, soon diverged. Commodities remained strong and on average didn’t peak until a year and a half after rate hikes began. Stocks have tended to struggle during these tightening cycles, working sideways to lower for an extended period of time. Every cycle has its own unique characteristics, but if history is any guide it makes sense to favor commodities over stocks when the Fed is rapidly tightening monetary policy.

This is the video recording of the April 7th Weekly Town Hall w/ Willie Delwiche.

04/07/22 2:00 PM ET

From the desk of Willie Delwiche.

I got a message last night that Ned Davis is retiring from the eponymous firm he launched more than four decades ago. Turns out, he’s not quite retiring – but he is stepping back. Either way, it’s a good time to reflect on his impact on the industry. 

His data-driven, evidence-based approach to the market can seem obvious to those of us who are following the trail he blazed. But it would have been less obvious at a time when data access and computing power were more limited than they are now. It was revolutionary then, and is the gold-standard today.

More than ever, the industry is filled with those who want to tell stories about what should happen without making space for feedback about whether that is happening. Many want to sit still and find ways to have their priors confirmed, rather than having a disciplined and objective approach toward weighing the evidence. Being data-driven is more than just doing a little math and including a decimal place. Knowing what you want the answer to be before you even ask the question is not evidence-based, it’s narrative-driven.

From the desk of Willie Delwiche.

From the desk of Willie Delwiche.

This All Star Charts +Plus Monthly Playbook breaks down the investment universe into a series of largely binary decisions and tactical calls. Paired with our Weight of the Evidence Dashboard, this piece is designed to help active asset allocators follow trends, pursue opportunities, and manage risk.

From the desk of Willie Delwiche.

From the desk of Steve Strazza @Sstrazza

Check out this week's Momentum Report, our weekly summation of all the major indexes at a Macro, International, Sector, and Industry Group level.

By analyzing the short-term data in these reports, we get a more tactical view of the current state of markets. This information then helps us put near-term developments into the big picture context and provides insights regarding the structural trends at play.

Let's jump right into it with some of the major takeaways from this week's report:

* ASC Plus Members can access the Momentum Report by clicking the link at the bottom of this post.

Macro Universe:

From the desk of Steve Strazza @Sstrazza

Our Top 10 Charts Report was just published.

In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.

 A Warning From Banks

With risk-seeking behavior increasing, Financials and banks are lagging behind and not participating to the upside in a way we’d expect. The chart below is an equal-weight representation of the six largest banks in the US. This index can act as a leading indicator for financials more broadly. The fact that the index has not been able to hold the 2007 highs in an environment where rates are rising globally is a concern. Throughout history, you don’t tend to see bull markets without financials. These are the largest and most important financial institutions in the world. Bulls want to see them carve out a bottom here and catch higher along with other cyclical stocks. It should happen soon if it’s going to.