Recent Publications

Trend in consumer prices remains upward following a November 2020 "buy" signal and is now high enough to begin to bother the market. Cycle trends are more mature and turn down in May, but maybe more importantly top in early August. This could be true globally as well. New 52-week lows are still low and that usually means the tape is still healthy.

Retail sales flat in April, following a stimulus-driven rush in the previous month. Consumer sentiment backtracks amid surging inflation expectations. Industrial production up less than expected, impacted by shortages. Businesses cannot restock fast enough to keep up with demand. Import price inflation on the rise.

Continued adoption was a tenant to our Bitcoin (BTC) overweight. However, if more prominent investors shun Bitcoin like Elon Musk because mining uses excessive energy, this tenant could be violated.

The largest European markets have diverse risk exposures, complicating macro and technical analysis. Current economic conditions are unfavorable for relative performance of the Swiss market. Trend, earnings momentum, and valuations suggest potential for further U.K. outperformance.

Global economic surprises still suggest economists have not fully adjusted to the boom underway. The output gap and the unemployment rate are greatly improved, but not yet to the point where our work indicates that good news is becoming bad news for stocks. However, extremes in median estimated corporate earnings and even dividend actions look to be nearly priced in for stocks.

Breadth deterioration from sell-off has been limited. Optimism relieved and ACWI oversold, similar to previous declines of 2021. Global benchmark maintaining correlating uptrend with commodities.

Positive trends across most commodities have created the strongest commodity breadth in a decade. With the strong breadth, allocators are choosing diversified commodity funds over chasing winners. Popular diversified commodity fund DBC's trend model is bullish, however, it is nearing intermediate-term overbought levels.

The acceleration in U.S. CPI in April outpaced that of most other major economies. The U.S. genuinely faces the risk of higher inflation due to outsized stimulus and greater underlying long-term growth. But the timing of the vaccine rollout, abrupt changes in preferences, and technical factors, such as varying CPI basket weights, suggest there's much more to the story.

Broad-based increase in producer prices. Jobless claims continue to decline. Consumer comfort up.

Downgrading Technology to underweight and upgrading Health Care to marketweight. Tech downgrade follows technical breakdown and sector model downgrade of the sector. Models and indicators continue to favor cyclical over defensive sectors, but the margin has been narrowing.

Market-based measures of inflation expectations nearing key levels. Longer-term measures of inflation haven't confirmed. We review several indicators of inflation expectations and underlying inflation.

Headline and core CPI jump, driven by goods shortages amid stronger demand. Annual inflation up, partly due to base effects. Underlying pressures still only moderate. This report does not change the near-term outlook for Fed policy.

We are initiating a short-term trade to overweight the SPDR S&P Health Care Services ETF (XHS) relative to the SPDR S&P 500 ETF (SPY). We like Healthcare Services for its attractive valuation, very strong seasonality through July, and an expected favorable ruling for the Affordable Care Act (ACA).

S&P 500 median P/E quits rising but is still very high despite booming earnings. S&P 500 median P/S is at record highs, as is market value versus Gross Domestic Income. Global valuations are also stretched. Financial confidence is at a record high, and ETF inflows continue at boom levels.

The economic cycle and NDR Cycle Composite turn negative for stocks in the second half. Macro and earnings indicators are quickly transitioning from bullish to bearish. Technical indicators remain bullish, but deterioration could dictate we lower our current bullish outlook.

Rising business optimism bodes well for the recovery. Price pressures surge. OECD U.S. CLI points to a strong economic outlook. Job openings exceed hires by a record number, suggesting mismatches. Housing affordability holds up, despite higher prices.

We initiate an overweight on a basket of travel-related companies with a target relative return of 50% by year-end 2021.

We provide a host of reasons for the shortfall in the employment report. Fed has been vague about defining "substantial further progress." If they use their "broadly inclusive" language for the taper, an announcement might not occur until next year.

Excess CAPE yield is used to measure valuation within the APAC region. It is most effective as a signal for two-year forward returns. APAC, as a whole, is expensive. By country, China, Korea, Taiwan are expensive, smaller EMs are generally less expensive.

Employment trends point to continued payrolls and real GDP recovery.

The NDR Commodity Model remains bullish. Commodity model is confirmed by solid breadth, ISM manufacturing commodity survey, and economic surprises. Global stocks remain mostly bullish, but with a slight loss of momentum - what that can mean for the U.S.

Payrolls expanded by 266,000 last month, 434,000 below the lowest forecast in the Bloomberg survey. Household survey also much weaker than expected. Taper talk off the table for now.

We previously highlighted the technical damage done to tech themes in April and observed that tech (and other COVID "winners") are likely to underperform as economies reopen. The Nasdaq-100 (QQQ) became a favorite vehicle of investors to play those winners. So, it stands to reason that as COVID retreats in the U.S., the NASDAQ would give back outperformance.

Consumer expectations of business conditions soar to a near-record high level. "Plans" to buy a home in the next six months hits record highs, despite a record jump in home prices. Job availability and "jobs hard to get" surveys suggest unemployment rate could fall to near 4% this year.

Stronger productivity gains cap ULC growth, which should hold down inflation pressures. Layoff trends continue to move lower, as labor market conditions improve. Consumer comfort off slightly, but level still suggests confidence in the recovery.

The global economy grew at its fastest pace in over a decade, according to the latest global PMI data. Amid the vaccine rollouts, for the first time in eight months the services sector outpaced manufacturing, which continued its V-shaped recovery. The U.S. and the U.K. led growth, the eurozone is showing signs of life, while Chinese growth stabilized.

Corporate, capital gains, and top individual rates have only been hiked simultaneously once, in 1942. With so few cases and the tax code so complex, simple conclusions like "stocks rallied last time" are insufficient. Pullbacks have been limited if the economic and monetary backdrops have been supportive.

While global equities more expensive, confirmation of extreme overvaluation is lacking. Noting that trailing earnings yields look worse than forward yields with earnings expectations rising. Also consider adjustments for real earnings cyclicality, interest rates and economic growth. Metrics agree that the U.S. is relatively expensive and the Financials sector relatively cheap.

Despite fading outperformance and individual country volatility, we are keeping our EM bond overweight for now. The global recovery remains intact and technicals are healthy. Nevertheless, we are keeping an eye on it for a possible downgrade should conditions deteriorate further.

The S&P 500 gained 5.2% in April, with all 11 sectors seeing positive returns during the month. The FANMAG group broke out to new highs, as all members other than Netflix outperformed the S&P 500. Industrials now has the lowest overall sector model score, and we have the sector on watch for a downgrade.

The bounce in FANMAG generated Tech Titan outperformance. Infrastructure ETFs continued to see positive money flow. We believe Biden spending plan and COVID reopening beneficiaries will outperform most tech-related themes this year.

CRE returns have stabilized but vary by property type. Transactions, confidence, and new construction all rebounding from the pandemic lows. Financing conditions expected to improve.

ISM Services PMI off its record high, but still signals robust expansion. ADP private payrolls post another strong month. Mortgage applications little changed.

Consumer confidence about the economy finally moves into the excessive optimism zone. Consumers' view on bonds is extremely bearish, which is a hopeful sign. Consumers' view on stocks falls to neutral from a bullish zone. Margin debt soars and stocks are high - even versus money supply.

We analyze 12 sub-cycles and the overall cycle. The economic recovery accelerated in Q1, amid a successful vaccine rollout, easing of COVID restrictions, and more fiscal support.

Stronger demand, a weaker U.S. dollar, higher energy prices, and drought conditions in South America are driving up agricultural commodity prices. Price trends are still positive, although sentiment has reversed from extreme optimism. Higher food inflation could be temporary, but watch its impact on inflation expectations.

Both imports and exports rebound, as the recovery gains traction. But net exports subtract from GDP growth. Light vehicle sales surge, as consumers deploy stimulus checks. Factory orders increase, a positive sign for manufacturing output growth.

Credit is expensive on an historical basis, as fundamentals remain compelling and the economy recovers. Credit quality has deteriorated within IG but has improved for HY. Continue to favor HY over IG.

Signs of improving relative strength in defensive strategies potentially signal increasing risk aversion. Sentiment is also indicating that investors may be too optimistic. But strong momentum in economic and trend indicators means we remain constructive on European equities.

Top-level model remains at 100% stock allocation. Highest allocations are with U.S. Large Caps, U.S. Small Caps, and U.S. Value. The stock/bond relative strength trend indicator resides near its highest levels in over 20 years.

A moderation in ISM manufacturing activity, largely due to shortages. Construction spending comes in below expectations.

Fed reiterates its very friendly policy. And as everyone now knows, "don't fight the Fed." Yet, what everyone knows might not be worth knowing - don't fight the tape.

Strong growth in income and spending. Inflation pressures up. Consumer sentiment continues to climb. Employment costs heading up, but y/y growth still contained. Regional factory activity shows broad-based gains.

Our crossover report shows E-commerce, Video Games, Internet, 5G & IOT, Mobile Payments, Cybersecurity and Technology Innovation EW thematic ETF portfolios experienced a "death cross" in April.

Despite huge QE (money printing) last cycle, money supply growth was modest, but no longer. While China and India had strong money growth last cycle, it was sluggish in many other developed regions. Watch organic growth to see if inflation pressures are sustained.

Dollar downtrend has resumed, with massive liquidity a negative influence. U.S. market stands to benefit while yen strength would threaten Japan. If dollar weakens with strength in emerging market currencies, emerging markets should be supported. With dollar falling and Industrial Metals rising, Materials should stand out among sectors.

Additional COVID waves and a slow vaccine rollout has seen the eurozone economy lag other parts of the world. But early reads of Q2 data and a ramp-up in vaccine orders suggest that the recovery may be stronger and closer than many investors and economists think. Beyond the rebound, the eurozone's problems remain.

Strong, broad-based growth in Q1, aided by government support. Jobless claims recede some more, helping drive consumer comfort up. Pending home sales held back by lack of inventory.

One is that inflation expectations remain well anchored at 2%. Another is that the inflation spike will be largely transitory. We identify three indicators to watch to see if it is not transitory. We show why bond investors should be concerned about rising inflation expectations.

Bigger trade gap expected to be a drag on Q1 GDP growth. Mortgage applications pull back slightly. Employment dynamics begin to normalize in Q3 2020.

We're closing our Emerging Markets overweight relative to Developed Markets. Trends, both absolute and relative, have deteriorated.

Cash position has been a top stock-return driver over time and performs well one year after a market bottom. Select companies based on cash position, long-term eps growth/eps stability, price momentum, earnings revisions, and free cash flow/enterprise value. Favored stocks include: Facebook, Home Depot, Bank of America, Danaher, Lowe's, Applied Materials, Charles Schwab, Deere, Target.

Economic surprises continue to come in on the upside, just as they have for many months now. Yet at the end of Q1, the DJIA price-to-dividend yield finally got to the overvalued zone going back to 1920. More worrisome, the S&P Industrial Average price-to-sales is at record highs, and our crowd sentiment composite shows excessive optimism, which may mean a lot of good news has been discounted.

Since mid-March, early cycle themes have corrected to near key support levels. The NDR S&P 500 Cycle Composite implies another up leg for some early cycle themes before transitioning in the second half. Watch small-caps, Value, Financials, Non-Payers, small-cap Tech, and Low Quality for a phased rotation.

Confidence is still below its pre-pandemic level, but recent surge bodes well for the economic outlook. Existing home prices keep rising, amid a persistent housing shortage. Richmond Fed regional activity continues to expand.

Tactical indicators suggest under-weight in European Health Care. But key global trends and a history of profitability provide a secular case for owning Health Care stocks. Relative valuations also look attractive.

Tactical indicators suggest under-weight in European Health Care. But key global trends and a history of profitability provide a secular case for owning Health Care stocks. Relative valuations also look attractive.

The three most important words facing investors: "substantial further progress." Such progress could be seen later in the year. Look for a tapering announcement between Jackson Hole and the November 2-3 FOMC meeting.

Real estate and commodity funds breaking out (IYR, ICF, CORN, SOYB, WEAT). Despite new highs, soft commodity funds are seeing outflows (CORN, SOYB, WEAT).

Stronger durable goods orders bode well for factory output growth. Texas manufacturing activity and outlook strengthen.

NDR volume demand continues to overpower supply. But volume demand is no longer making new highs, particularly shorter-term. Fab Five Tape is still bullish.

Demographics help explain the long-term disinflationary trends the developed world has experienced in recent decades. But forecasts suggest that these disinflationary forces will fade in the coming decades. We discuss why the future may be an exception.

New highs in both services and manufacturing flash PMIs suggest faster and broader growth in Q2. New home sales rebound strongly.

Recently, our Technology Innovation ETF portfolio experienced a relative strength death cross. While we are not calling for the death of Apple or Tech, a year of mean reversion and taking a back seat to more Value-oriented industries certainly seems plausible.

Gold has resumed its uptrend. Miners tend to outperform the metal during gold bulls. Miners' technicals are improving, but are not yet bullish.

Profits are set to boom this year. But expectations are already rumored to be up over 40% for the year. Historically, when news is out that earnings are up over 20% year-to-year, on average, the S&P 500 has had below average performance.

Upgrading gold from neutral to bullish. Bullish evidence described by Gold Watch aggregate. Positive factors include trend, sentiment, U.S. dollar status, commodities, real interest rates, and expansionary policy.

LEI and all of its components rise in March, a sign of broad-based improvement in the economic outlook. CFNAI confirms activity rebounded strongly at the end of Q1. Tight inventory weighs on existing home sales. Prices rise at a record y/y rate. Initial jobless claims fall to a new pandemic low. Consumer economic expectations rise.

Brent crude's 600%+ gain from its April 2020 low represents its best one-year return since at least 1988. Despite the record return for oil over the previous year, Energy has underperformed the S&P 500. Energy returns in year two following major oil bottoms have been mixed, but models remain bullish for now.

The Bank of Canada reduced its pace of asset purchases on a brighter economic outlook. Canadian near-term outlook is remarkably similar to that of the U.S. The Bank could be a leading indicator for other major central banks, especially the Fed.

Architecture Billings Index hits highest level since 2007. Mortgage applications rebound. Economic recovery broadens across states.

Clean Energy ETFs have pulled back this year after a tremendous run in 2020. The American Jobs Plan may be a catalyst for the Clean Energy theme. Valuations and sentiment may not move to attractive levels before we look to upgrade the theme.

The price momentum strategy typically outperforms one year after a market bottom. Choose stocks based on price momentum, earnings revisions, operating cash flow yield, and net payout yield. Selected stocks include: BMW, Compagnie de Saint Gobain, AP Moller-Maersk, Evonik, Suez, Yara International, Rio Tinto, Royal Dutch Shell, BT Group, Persimmon.

Particularly at major peaks or troughs, sentiment can get excessive well before turning points. We can wait for extremes and then a reversal for action signals to indicate "the" peak in sentiment has been reached. We can also adjust sentiment/valuation indicators for the tape, the Fed, or macro background for better action signals.

NDR Sentiment composites are near multi-year highs. Optimism and breadth thrusts cancel each other out, on average. Watch long-term breadth on any declines for signs of a healthy pullback or developing bear.

After a large move in yields, it's not unusual for a market to take a breather and consolidate its recent yield gains. Inflation expectations are critical to the outlook. An upside breakout would call into question the assumption that inflationary pressures were just transitory. We remain defensively positioned for now, but another leg up could present a buying opportunity.

Dire state of infrastructure necessitates government investment spending. The size and composition of the AJP imply a productivity boost and faster potential output growth. Some clear beneficiaries include construction, capex equipment, and R&D.

Trend evidence on stock prices continues to lean bullish. Pumped up by government spending, consumer price inflation has now clearly moved upward. We show inflation versus the economy, stocks, bonds, and gold.

Upward trends in housing starts and permits strengthen. Consumer sentiment rises. But so do near-term inflation expectations.

Following the release of the American Jobs Plan (with $111 billion earmarked for clean water supply), Global-X launched a clean water ETF (AQWA) bringing the number of ETFs in this growing space to six. The funds are heavily weighted to industrials (infrastructure spending beneficiaries) and utilities (most oversold of all sectors). We may look to upgrade the group on a relative strength breakout.

Global equity volatility has been reversing as secular bull has strengthened. VIX returning to levels last seen in 2017, inversely correlated with ACWI and Treasury yield. EM stands to benefit from declining global market volatility and falling FX volatility. Dropping commodity and dollar volatilities positive for commodities, negative for dollar.

ISM PMI and NMI combined are at new record highs and are very bullish for the economy. Also, this looks quite hopeful for first-half corporate profits. Perhaps this is hopeful for stocks too, but there can still be a case where the news is "too good," causing problems for stocks and bonds.

Our measure of relative economic performance now puts developed economies at an advantage over emerging markets. COVID, slow vaccine rollouts, and rising inflation present near-term risks to the emerging world. But long-term prospects remain favorable.

Broad-based surge in retail sales, driven by stimulus and more vaccinations. Initial jobless claims drop. Consumer comfort up. Industrial production recovers in March from the weather-driven decline in the previous month. Regional manufacturing indexes show strong factory activity in early Q2. Strong builder confidence bodes well for housing starts in the near-term. Business inventories still too low relative to sales, due to supply chain issues.

We are adding 2% points to Utilities and upgrading to marketweight. Financials will be reduced by 2% points but remain an overweight. Mean reversion, an attractive dividend yield, and the capex cycle should benefit Utilities going forward. Utilities could turn out to be a stealth green-energy play with stronger defensive characteristics than more traditional green energy equities.

Fed bond buying is helping to absorb the supply of Treasurys. Foreign investors are the best source of demand to replace the buying from the Fed. Issuance will be reduced when the Fed tapers, mitigating the risk of a sharp yield backup.

Stronger demand, shortages, and a weaker dollar drive import prices up. Mortgage applications dip.

Only about 35% of Biden's spending plan is what we call core infrastructure spending. We highlight our favorite ETF and stocks that can give investors exposure to increased core infrastructure spending. Infrastructure stocks are showing strong performance in 2021 and we may upgrade infrastructure on a relative breakout.

IPOs and secondary stock offerings are at record dollar highs, but other versions are not quite as bad. American Association of Individual Investors had been quite skeptical, but no longer. S&P 500 Median P/E and NDR Crowd Sentiment Poll are problems.

Net repurchases are poised to rebound in 2021. Corporations are offsetting buybacks with record initial and secondary offerings. Individual and international investors hold record amounts of stocks.

Energy and base effect drive CPI inflation higher. OECD U.S. CLI points to a strengthening recovery. Government budget deficit continues to swell.

Strong global economy positive for European equities on an absolute basis. Indicators mixed for Europe versus U.S. equity performance. Watch relative momentum in lead indicators and relative trend in forward earnings for Europe versus U.S. equity performance.

Strong global economy positive for European equities on an absolute basis. Indicators mixed for Europe versus U.S. equity performance. Watch relative momentum in lead indicators and relative trend in forward earnings for Europe versus U.S. equity performance.

Credit conditions remain favorable, as broad indexes like the NDR CCI and the NACM CMI are close to record levels. Low credit spreads are emblematic of risk-on behavior and are associated with rising bond yields and small-cap outperformance. Risk rally has more to go as most of our credit indicators do not show signs of weakness.

Preferreds and utilities hitting new highs (PGX, PFFD, FUTY, IDU ). Reflation trade (China, precious metals) making new relative lows (MCHI, SLV).

CFOs forecast stronger economic growth in 2021. Robust revenue and employment growth expected in the near-term.

Tape plus Fed is bullish for the S&P 500 and is consistent with over 18% per annum hypothetical gains since 1968. The tape plus central bank also looks (no guarantee) very useful historically on the ACWI World Index and Europe ex UK. Ditto for China, and Japan is particularly interesting.

Broad-based jump in producer prices. Pipeline pressures build. State coincident indexes show continued economic recovery. Wholesale inventories up, but shortages still prevalent.

The inclusion of broadband in the Biden infrastructure plan may have been enough to break the NDR 5G Network Infrastructure group out of its relative downtrend vs. the S&P 500. With a positive correlation to Treasury bond prices, a decline in yields should provide an added boost. We have the 5G infrastructure group on upgrade watch.

Macro data for February was very soft, and Q4 profits slid in GDP report. But, leading indicators plus PMIs are very firm. March and April data should bounce back strongly.

Equity trend and trend breadth are bullish. Powerful, year-long rally has pushed mean-reversion breadth to an extreme. Leveraged ETF derived sentiment measures giving mixed messages.

Risk-On/Risk-Off Ratio and commodity trend reflect economic expectations that are also supporting global equities. Long-term performance and external indicators will help determine if commodities have entered a secular bull. If current correlations persist, an ongoing commodity advance would take place with rising equities, bond yields, and inflation expectations, along with a rising RO/RO.

The global economy picked up significant pace in March, according to the latest PMIs, supporting our recent global growth upgrade. Manufacturing is still in a V-shaped recovery, while services is gaining ground amid vaccine rollouts. U.S. economy is in the lead, China's soft patch is over, while Europe is recovering.

Initial jobless claims still more than 3x their pre-recession level, as labor market is far from healthy. But consumer comfort breaks out of recent range, which bodes well for spending growth ahead.

Fair value for 10-year bunds will rise to -8 bp, with risk to 42 bp. For 10-year JGBs, fair value will fall to 38 bp, but will unlikely exceed 25 bp. For gilts, the risk is up to 1.25%.

Themes expected to benefit from Biden's spending plan outperformed in March. Top-performing 2020 themes, small-cap Value, and EMs continued to cool in March. Bitcoin and Homebuilders are currently our best performing recommendations.

Growing trade deficit expected to be a drag on Q1 GDP growth. Mortgage applications pull back. Used vehicle prices keep surging.

Margin debt and ETF flows suggest speculators are "all in," partially financed by the "stimmy" checks. So far, it doesn't look like they saved that much of the stimulus. Money market cash has risen somewhat, but is still low relative to the value of the stock market. Valuations are stretched on P/E and on price-to-replacement cost book value.

Earnings are following the post-recession pattern, but on a compressed timeline and amplified magnitude. Second years of bull markets are defined by faster EPS growth and declining P/E ratios. The risk later in 2021 is that by the time the EPS rebound is reported, the good news is priced in, leaving little to look forward to in 2022.

Value sectors continued to outperform Growth sectors in March. The sector model shifted away from cyclical Growth sectors in favor of defensive/bond proxy sectors. Utilities finished as the top performer in March, and we have the sector on watch for an upgrade.

Job openings increase to highest level in more than two years. Unemployed per job opening shows labor market slack diminishing.

High-volatility stocks have performed strongly in the last year, contrary to the long-term history. This is because while high-volatility stocks outperform in bull markets they give back all their gains and more during bear markets. Current strong performance of high-volatility stocks supports a positive outlook for European equities.

High-volatility stocks have performed strongly in the last year, contrary to the long-term history. This is because while high-volatility stocks outperform in bull markets they give back all their gains and more during bear markets. Current strong performance of high-volatility stocks supports a positive outlook for European equities.

Reducing the U.S. to an underweight 45% from 48%. Increasing Europe to an overweight 33% from 30%. Model catching up with our view, as U.S. allocation plunges. Fundamental and technical factors support model and positions.

A pullback in Chinese commodity demand has weighed on commodity price growth recently. A stronger U.S. dollar has also been a negative. But an improving global economic growth outlook, led by the U.S., supports a return to the commodity price uptrend.

ISM Non-Manufacturing Index hits highest level on record. Price pressures also rise. Employment trends strengthen. Factory orders pull back in February, partly due to severe winter weather.

Downgrading Emerging Markets from overweight to marketweight, upgrading Japan from underweight to overweight. Shifting 4% in response to March update of Global Regional Equity Model. Long-term uptrends and influence of global reflation and liquidity reduce chances of EM downgrade to underweight and bearish gold position.

The Fab Five Tape Component continues to be favorable and is confirmed globally. Favorable April seasonal returns are the third best of the year historically. But the longer-term tape is extended.

The rebound from February's winter storms, vaccine rollouts, more reopenings, and stimulus impact lead to widespread job gains. Higher employment and participation translate into broad-based declines in unemployment rates. But the labor market remains a long way from the Fed's goal of full employment. Light vehicle sales rebound strongly. State coincident indexes show minimal risk of recession at the start of 2021.

The semiconductor equipment sub-industry appeared on our breakout report as it ended the first quarter at an all-time high. Over the last 10 years, April has been, on average, the weakest month for semiconductor equipment. If seasonality holds, April may work off some frothiness.

The S&P 500's four-quarter gain of 53.7% is the fourth-highest since 1926 and best post WWII. Bonds posted their worst quarter in 40 years. Value beat Growth by most since 2001.

Recent data confirm that China's early 2021 soft patch is over, supporting our recent upgrade to global growth. But there are few signs of upside surprises as the year progresses amid rising risks. Long-term potential growth will continue to trend lower.

ISM Manufacturing Index hits highest level since 1983. Shortages impede an even faster growth and are also pushing up inflation. Layoff trends improve, but labor market far from healthy. Consumer comfort strengthens to its best level in a year. Construction spending slips in February due to severe weather.

Our defensive SHUT Index broke above its November 16 high on March 26, although relative downtrend remains intact. Sector model and other indicators shifted more defensive in March. We may begin to reduce our defensive underweights in the coming weeks.

We came into the year defensively positioned, expecting a steeper curve, and favoring high yield. We present five indicators we're watching, which could impact Q2 performance. Breakouts in inflation expectations would be most disconcerting.

The trend for home prices is clearly upward, but it also looks like it may be "overbought." Home prices look extended long-term and are a little "bubbly" versus income. Lack of supply is a big question mark.

ADP payrolls increase by the most in six months, led by leisure and hospitality. Regional factory activity strengthens. Pending home sales take a dive, largely due to lack of inventory.

Since our trade initiation, EM relative earnings growth improved but did not lead to multiple expansion as expected. This trade may be closed out soon. For now, we'll allow the USD and China trends to play out and maintain our stop just below the relative strength 200-day moving average.

Extreme holdings of financial assets versus personal income that supports these assets has not been great for stocks, or the economy longer-term, despite the Fed pumping them up. The S&P 500 P/S is also at a record high, along with the Value Line P/E. The Elite Eight P/E and P/S are also overvalued. DAVIS265 jumped from just 38.9% to 68.9% bulls.

Market breadth readings tend to deteriorate in the second year of cyclical bull markets. The deterioration in long-term and short-term breadth is worse for bulls that end in year two. We will lean on our models for the timing of any reduction in our bullish outlook on U.S. equities.

Consumer confidence breaks out to its best level in a year. Purchasing plans improve. Existing home prices start 2021 strong. Texas services activity and outlook surge.

Recent rise in global yields is consistent with a move into the mid-stage of the global economic cycle. This supports a tactical tilt toward cyclical and away from defensive sectors. Rising European yields would benefit the Financials sector most, while rising inflation expectations would support the Energy and Materials sectors.

Recent rise in global yields is consistent with a move into the mid-stage of the global economic cycle. This supports a tactical tilt toward cyclical and away from defensive sectors. Rising European yields would benefit the Financials sector most, while rising inflation expectations would support the Energy and Materials sectors.

Our TIPS model is the most overvalued since April 2013. But the Fed's asset purchases are likely creating a distortion. We are maintaining our overweight stance on TIPS for now. We're watching to see if the 5-year/5-year inflation measures break out to new highs.

Top-level model jumped to 100% stock allocation. Highest allocations are with U.S. Small Caps, U.S. Value, and U.S. Large Caps. Purchasing Managers' Index breadth and global equity market breadth indicators switched to favoring stocks.

Texas factory activity index best since 2018. Strong demand and output growth in the region. But also a jump in price pressures, partly due to delivery delays.

Big Mo Tape is consistent with mildly bullish tape. Sometimes the conservative public sells at major peaks. Speculative public flows into ETFs hit new records on the upside.

Income and spending decline in February, impacted by swings in government transfers and severe weather. But a jump in consumer sentiment in March suggests renewed spending growth in the near-term. Goods trade deficit widens, likely weighing on Q1 GDP growth.

Over the past thirty market days, Video Games has been one of the weakest performing themes (-15.2%). Video games are coming off a peak in sentiment not only as a COVID beneficiary, but also from a new console cycle. However, after a 2-month "sell on the news" period, the group often bounces back.

I think the economy will boom in 2021 with massive stimulus, confirmed by surprises on the upside domestically and globally. Yet, there has already been a boom in goods spending, particularly durable goods, perhaps due to COVID. Augmented unemployment, if correct, could also suggest deeper problems in the labor market. I wonder if COVID has also distorted the supply of homes.

COVID fiscal support stacked up similarly among developed economies in 2020. But the American Rescue Plan now puts the U.S. significantly ahead, making the U.S. the leader in global growth. Governments have more fiscal space than before, but policies will need to boost potential growth in order to maintain credibility.

Inventories drive Q4 real GDP upward revision. GDI surges. But corporate profits decline. Jobless claims show signs of labor market healing. Consumer comfort improves, while expectations hold steady.

Energy, Materials, Health Care, and Communication Services had their best start to a cyclical bull market over the last year. Above-average returns and below-average earnings growth resulted in greater P/E expansion this cycle than normal. Most sectors see positive but smaller returns, faster EPS growth, and P/E contraction in year two of bull markets.

As in 2017, the secular bull tailwinds are strong and we are overweight equities, underweight bonds. While rising bond yields unsettling, offsets include bullish liquidity, the favorable outlook for economic growth and earnings, strong global breadth, and the trend of receding volatility. Indicator mix similar to 2017.

Although there used to be a good relationship between money supply and GDP, it broke down long ago. Velocity has lost its meaning. The equation of exchange ignores asset purchases.

The last year was the third-best start to a cyclical bull market since 1900, and best post WWII. Extremes were reached for EPS growth, P/Es, economic growth, money supply growth, and bond yields. The second year after bear market lows are defined by smaller gains, bigger drawdowns, stronger EPS growth, and falling P/Es.

Both services and manufacturing PMIs close to multi-year highs. Durable goods orders slip in February, but y/y trend consistent with strong capex demand. Architecture billings rebound suggests a pickup in nonresidential construction spending in late 2021. Mortgage purchase applications hold up, despite higher mortgage rates.

Tech Titan relative strength has been improving since March 8. Titans could be doing better only because fears of a COVID third wave have paused the reopening trade. Still, we like the improving risk/reward for Titans and have the group on watch for an upgrade.

FCF/EV has been the top stock-return driver over time and recently produced the highest factor composite score in its history. Select companies based on cash position, long-term eps growth/eps stability, price momentum, earnings revisions, and free cash flow/enterprise value. Favored stocks include: Facebook, Bank of America, Home Depot, Accenture, Danaher, Lowe's, Charles Schwab, Deere, Applied Materials.

Valuation on bonds is very questionable; foreigners look overbought and are cutting back on their bond holdings. But there are some offsets as households and institutions are underweight bonds. Trend in gold is down, but there are some hopeful contrary signs.

New home sales plunge, impacted by severe weather, low inventory, and rising mortgage rates. Richmond Fed manufacturing and services activity strengthen. Current account deficit swells at the end of 2020. Truck tonnage drops amid severe winter weather.

We estimate fair value on tens will rise a modest 12 bp to 1.70% by yearend. Post-GFC, yields have overshot fair value by around 50 bp, making 2.25% a possibility. Good technical support can be found around 2.00%.

Home sales fall amid inventory shortages and rising mortgage rates. CFNAI dips ahead of Biden stimulus.

Stocks' trend remains upward, boosted by yet another breadth thrust buy signal. But Tobin's Q, median earnings yield, and even real earnings yield on total earnings are all negative. Plus, stocks look overweight for household's financial assets.

We've been looking for investors to reward the company via multiple expansion for its commitment to electric vehicle production. Even after this recent run up, the shares are still cheap vs. peers. However, this move is too far too fast to be sustainable.

Personal saving rate soars in Q4, with a lot more checks in the mail in Q1. Yet, net national savings rate is negative. Moreover, debt is high overall, but with low debt service currently, thanks to ultra-low interest rates.

Despite performance gap, bond inflows and stock outflows have continued since cyclical bull started. But moving averages show flows starting to shift. Continuing flow shift likely if global equity uptrend persists with receding stock volatility. Reallocation would also be driven by ongoing bond yield ascent with rising bond volatility.

Positive economic news and rising rates present a headwind for Growth-oriented shares. Our Positive Trends in GARP screen is dominated by financial ETFs. Diversified and non-U.S. funds meeting the screen criteria, mostly overweight financials as well.