From the desk of Willie Delwiche.

I planned on writing about how fishing is a great metaphor for investing. 

But I’ll have to tackle that idea another day. 

Today, I’m thinking about fishing not as a metaphor for investing, but as a metaphor for not investing -- actively stepping away to preserve financial capital. Perhaps even more importantly, stepping away to rebuild mental capital. 

Whether it's casting for trout in Oregon or trolling for salmon in Lake Michigan, getting away from our screens and electronic gadgets and connecting with the water is clarifying and restorative. It’s not just about the catch… 

Beyond fishing, it's important to cultivate places where we can get away from it all, even if for just a few moments. We need to find places where we can set aside the active wrestling with trends and troubles. Places where we can catch our breath, clarify our thoughts, and reinvigorate our souls. 

From the desk of Willie Delwiche.

Key Takeaways:

• Breadth thrust regime from last year has expired
• Higher inflation and unbalanced asset allocations can weigh on stocks
• Global earnings revisions trends remain healthy 

2020 was a remarkable year in many ways. The rally that emerged off of the early year lows was broad-based and historically strong. It was fueled by numerous momentum surges, overwhelming amounts of fiscal and monetary liquidity, an unprecedented string of better than expected economic data, and a persistent trend in earnings estimates being revised higher. While 2021 began with some of those tailwinds intact, as we move toward the second half of the year, we want to avoid the assumption that nothing has changed as we have entered year two of the cyclical rally. 

From the desk of Willie Delwiche.

From the desk of Willie Delwiche.

• Health Care moved up three spots in this week’s relative strength rankings, but has yet to crack the leadership group. Industrials sector continues to slip in terms of relative strength.
• Both our sector and industry group relative strength studies show Energy and Real Estate as areas of emerging leadership across the size spectrum.
• With Consumer Staples and Utilities still near the bottom of the rankings, it’s hard to make the case for a decisive shift toward defensive leadership in the equity markets.

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 context of the big picture 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 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.

Outlook For Yields Turns Lower

Despite a historic CPI print, yields are unanimously pointing lower, including other vital metrics from different asset classes. Both the Copper/Gold and Regional Bank/REIT ratios have been pointing down for some time, and the all-important High Yield/Treasury Bond spread is shifting to a more bearish tilt for risk assets. It’s pretty clear right now that either the Bond market disagrees that long-term inflation is here to stick around or disagrees with the stock and commodity market on how it’ll affect.

This is where a lot of our mixed signals are coming from right now. Risk assets and commodities, particularly Crude Oil, are pointing to further upside for risk, while the Bond market is beginning to raise some alarm bells. And if we know anything about the Bond market, we consider it smart money. Watch this space...

From the desk of Willie Delwiche.

After several failed attempts, the S&P 500 managed to make a new closing high on Thursday. The percentage of stocks making new 21-day highs (lower pane) did not expand as the index moved into record territory, but the percentage of stocks making new 21-day lows (upper pane) did. In fact, we’ve never before seen this many stocks making new short-term lows with the index making new all-time highs. This is not the sort of beneath the surface action you tend to see when a market is gaining strength for a sustained rally. Rather, it speaks to a continuation of what we have seen of late -  a choppy environment where less is more and cash on the sidelines is good for both mental and financial health.

This is the video recording of the June 10th Town Hall Meeting w/ Willie Delwiche & JC Parets

06/10/21 2PM ET

From the desk of Willie Delwiche.

My colleague Sean shared a quote on Twitter recently about reading books and the discipline of not necessarily finishing one just because you started it. 

There is a tension there. Working through a challenging read can be great. Trying to get through a book that isn't worth your time or is inaccessible to you is not a virtue. Discerning when to persist and when to give in is a skill.

I look at this situation through a slightly different lens. A book worth finishing is worth multiple reads. For me, this means going over it enough that I can remember, access, and share the perspective. Too often we treat books as trophies on a shelf. Owning a book doesn’t mean we have ownership of what the book says. If we are not going to take ownership of the content, why own the book?

We don't want to clutter up our charts with meaningless indicators, so why would we clutter up  our shelves with books that are outside our grasp? 

From the desk of Willie Delwiche.

Key Takeaways:

• Active/passive debate is in need of an overhaul
• Dynamic allocation emphasizes what you own as well as when you buy it
• Shifting leadership trends could force portfolio decisions

The active-passive debate has never been really well framed. It's been oversimplified to the point of being meaningless. For example, the shift from actively-managed mutual funds to passive ETF's would seem like a victory for passive proponents. But if investors have moved from buying-and-holding those mutual funds to moving in and out of ETF's, is this really a shift from active to passive?

From the desk of Willie Delwiche.

From the desk of Willie Delwiche.