April’s Chartisphere looks at five charts PP&W finds particularly helpful as we head into the 2nd quarter. Charts 1 & 2 look back at the change in leadership that has occurred as tech has seemingly begun to share the limelight with more value-oriented companies with expectations of the economy opening back up. Charts 3 & 4 examine some market internals suggesting there’s reason to remain positive on stocks for now. Finally, Chart 5 provides a look at the dominance of domestic stocks over the last decade, recalling the shift from US to international leadership 20 years ago.
Chart 1: Major Indices Performance in Q1
Here’s a summary of how the more major indices did in Q1 2021 – all in all, the first quarter was in favor of risk assets (and not favorable to gold or Treasury bonds) and is a productive step for 2021 and a relatively new bull market.
Chart 2: Nasdaq 100 vs S&P 500 (Since 2/16/21)
Since the recent peak of both large cap indexes on February 16th, here’s how you can see the shift to more value-oriented sectors is occurring. The NASDAQ 100 is 90% made up of primarily large-cap growth companies, not the industrials, financials, or energy companies that are more represented in the S&P 500. Those more value-oriented sectors are carrying the S&P higher while technology – at least until this point in the year – seems to be catching its breath after a big 2020.
Chart 3: Safe Haven Index
Courtesy of our friends at All-Star Charts – if appetite for risk was waning, you would see Gold, long-term US Treasuries, and the Japanese Yen going up in value. That is not the trend at this point. It will remain to be seen whether any positivity in the chart below negatively impacts stocks.
Chart 4: Bad Breadth is Nasty (haha!)
As investors we much prefer good breadth, and fortunately we've been seeing it in the equity markets – meaning that it’s not just a few companies leading markets higher, it’s many. In fact, we have the highest percentage of stocks above their 200-day moving average since 2013. We read this as a positive for stocks, and supportive of an uptrend in risk assets.
Chart 5: Tired of Winning?
Finally, will this be the year for International (Ex-US) to finally outperform the good ‘ol USA? The US has been outperforming the rest of the world for the better part of a decade, much like the 1990’s. The rest of the world, however, outperformed during the 2000’s decade. Only time will tell!
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