Recent Publications

The LEI fell more than expected in April, pointing to slower growth ahead. Our ETM suggests continued moderate expansion.

Weekly talking points and key visuals from NDR strategists' insights.

Recently I paid $30 for a burger and beverage at a restaurant and finally reached my limit on high eating out prices. Maybe I am not alone as the ratio of restaurant to grocery sales may have peaked.

Harmonized CPI shows inflation in the 2.0% vicinity. But it excludes owner-occupied housing and thus understates true inflation. By this measure, U.S. and Eurozone inflation is the same. But real GDP growth is much stronger in the U.S., which is why the Fed may lag the ECB in cutting rates.

Led by vehicles and other durable goods, manufacturing output falls in April. Philly Fed factory activity weakens in May, an early sign of further slowdown in overall manufacturing. Housing starts pick up, but trend remains subdued. Initial jobless claims decline. Trend consistent with robust labor demand. Import prices jump, despite a strong dollar.

Gold would benefit from continuing declines in nominal and real yields, TIPS and the expected real yield. Gold's long-term uptrend well intact and at forefront of commodity uptrend. Gold maintaining inverse correlation with U.S. Dollar Index, which has been losing momentum. Dollar has positive correlation with real bond yields, which have been dropping, and real rate differentials, which have been narrowing.

The breadth recovery has been led by defensive Value and cyclical Value sectors. The market correction has not decisively altered established leadership trends. However, the sector model has shifted away from Growth sectors over the last few months.

CPI rises less than expected in April. Shelter and gasoline drive price growth. Super-core inflation still uncomfortable. Retail sales come in flat, showing tentative cracks in consumer demand. Builder confidence slumps, implying weaker housing starts ahead. Mortgage purchase applications also fall. Empire manufacturing activity continues to contract.

A defining feature of Q1 earnings season is a surge in repurchase and dividend announcements, reversing a 2022-23 decline. The biggest shareholder payments have come from mega-cap tech, Financials, and Energy sectors. Focus on shareholder returns supports the bull market, provided firms do not overleverage their balance sheets.

We give a mid-month update on outperforming themes. Like April, themes within our Global Shock category are leading the way.

The Fed has not dissuaded many other central banks from easing policy in this current cycle. History suggests that short Fed easing cycles have not deterred other major central banks, like the ECB and BoE, from easing more aggressively. There could, however, be some second-round inflation effects stemming from the Fed's relative hawkishness, especially to emerging markets.

Long-term valuation measures are rising back toward record levels. Valuations relative to inflation look expensive. Shorter-term sentiment is more mixed.

Flows to equity funds declined in April but rebounded in May. Bond flows are also improving this month. Flows to European equity funds are mostly positive this year while Latin American funds are experiencing outflows. Flows to Industrial sector equity funds and U.S. corporate bond funds stand out relative to other sectors for their higher year-to-date flows compared to 2023.

PPI inflation accelerates, led by services. Small business optimism improves slightly, but still within a low range.

R-star is a useful theoretical concept for bond investors, but there is a wide array of estimates. R-star should reflect the fundamental determinants of potential growth. R-star should be higher than it was during the pre-pandemic period. We estimate the nominal longer run neutral rate is 4.0%, above the Fed's estimate.

Broad global trend strength is indicated by spreads between 50-day and 200-day moving averages, with equal-weighted ACWI at new bull market highs. Japan's long-term trend is the strongest among regions in our seven-way framework, followed by the U.S. Spreads are the widest for Communication Services among U.S. sectors and Mid-Cap Growth among other U.S. indices.

A steep drop in consumer sentiment suggests slower economic growth ahead. Inflation expectations rise. Initial jobless claims spike, but the 4-week trend is still muted, consistent with robust labor demand.

Weekly talking points and key visuals from NDR strategists' insights.

Millen-Z is the generation we get when we combine the 90s Millennials with the 00s Gen-Z. We focus on this cohort because it had the highest number of births (81.3 mil.) of any 20-year period in U.S. history.

Our VIX indicator flashed a "sell" signal on Monday. But low VIX readings have been bullish for high yield. Falling bond volatility has been good for equities. Relatively high bond vol readings suggest stock investors may want to pay more attention to bond volatility than to stock volatility, as additional declines in bond vol could support a further rally in equities.

We revise up our projection for 2024 real GDP growth by 50 bps to 1.5%-2.0%. The upward revision is prompted by resilient domestic demand in Q1, favorable credit conditions, and continued tight labor market. The economy is still on a slower growth trajectory, implied by falling soft data, slower hiring, diminishing excess savings, and rising delinquencies.

Global breadth has improved after reversal from sentiment extreme. Outlook currently supported by bond yield retreat, dropping recession risk and rising earnings confidence. Continued improvement would be threatened by renewed bond yield advance, rising recession risk and reversing expectations for earnings growth.

Upgrading Utilities to overweight. Health Care will see its allocation reduced but will remain an official marketweight recommendation. Risks for Utilities include rising interest rates and elevated debt burden.

The buyers of bonds today are different from the buyers of bonds during the QE era. Today's buyers are price-sensitive, and the burden has mostly fallen on households. As long as the Fed is expected to cut rates, there will be plenty of buyers for U.S. Treasurys. When conditions change, prices can quickly change.

Hedge funds have one of their biggest net short positions in Russell 2000 futures on record. Asset managers have close to the biggest net long position in EAFE futures since early 2020. Hedge funds were record net short two-year note futures heading into the FOMC meeting.

While wholesale inventories fell in March, stronger import growth implies a rebound in the coming months. Housing affordability remains depressed and a drag on existing home sales. Manheim used car prices fall, pointing to more downward pressure in the CPI for used cars and trucks. Employment Trends Index suggests slower payrolls growth ahead.

Breadth deteriorated slightly with 18 of 48 themes (38%) outperforming in March versus 19 of 48 in March. April was mainly risk-off driven by "higher for longer" rate fears, though we saw risk-on return late April. Commodity themes are showing leadership in a down market but watch performance as markets rise.

Earnings beat rates relatively high with upgrade breadth improving. Forward earnings growth estimates are trending higher. Forward growth rates exceed trailing rates in most markets and sectors.

Stalling equity momentum has coincided with some rotation into Defensive sectors, while Cyclical Value strongly outperformed Cyclical Growth in March and April. We find evidence for a more moderate Cyclical sector tilt but not enough to recommend a Defensive sector tilt. We see the recent outperformance of Cyclical Value vs. Cyclical Growth in line with a short-term reversal from an extreme oversold condition.

Global growth accelerated to a 10-month high in April, according to the latest PMIs, and consistent with continued upside in global equities. Economic breadth remained strong, as most economies continued to expand. However, some leadership trends have changed. Despite some cooling in price pressures, they remain sticky.

Lending standards tighten at a slower pace, amid weak demand. Distinction made between healthier large banks and other banks in several categories. Our CCI remains supportive of growth, profits, and capex.

A long period of excessive optimism set up the likelihood of a short-term correction. We did correct the excess optimism but not down to truly extreme pessimism. And the NDR Cycle Composite looks for further correction into May. Breadth thrust buy signals from late last year should still have some residual value, though 9-to-1 down days are a concern.

The Catastrophic Stop model entered May fully invested. The International Equity Core model is overweight China, France, and Germany, while underweighting the U.K., Australia, Japan, Canada, and Switzerland. The Explore model favored Israel, Mexico, Malaysia, Netherlands, and Sweden.

The All-Country World ex.-U.S. Total Return Index declined over 170 basis points in April. The International Equity Core model is overweight China, France, and Germany, while underweighting the U.K., Australia, Japan, Canada, and Switzerland. The Explore model favored Israel, Mexico, Malaysia, Netherlands, and Sweden.

During April, global stocks underperformed U.S. bonds by more than 70 ba sis points. The Global Allocation model's equity weighting remains above benchmark allocation. The model has an above benchmark weighting for Emerging Markets and Europe ex. U.K., while holding below benchmark allocations for Pacific ex. Japan, the U.S., Japan, Canada, and the U.K.

During April, global stocks underperformed global bonds by more than 70 ba sis points. The model's equity allocation remains above benchmark weighting, with U.S. Large-Caps and U.S. Growth each receiving more than 20% allocation. The largest fixed income allocations were Emerging Market bonds and U.S. High Yield, both with more than 5% weights.

The Fixed Income Risk Management model deteriorated during the month, but entered May with a fully invested allocation to fixed income sectors. The Fixed Income Allocation model entered May positioned for an inflationary environment. The model is overweight U.S. Floating Rate Notes, U.S. High Yield, and International Investment Grade, and underweight U.S. Mortgage-Backed Securities, U.S. Long-Term Treasurys, U.S. Investment Grade Corporate, and Emerging Market bonds.

The Bloomberg Barclays U.S. Aggregate Bond Total Return Index weakened in April, as breadth deteriorated. The Fixed Income Allocation model entered May positioned for an inflationary environment. The model is overweight U.S. Floating Rate Notes, U.S. High Yield, and International Investment Grade, and underweight U.S. Mortgage-Backed Securities, U.S. Long-Term Treasurys, U.S. Investment Grade Corporate, and Emerging Market bonds.

Breadth deteriorated sharply-10 of the 11 S&P 500 sectors posted negative returns for the month. Financials, Information Technology, Health Care, and Utilities are above benchmark weight. Real Estate, Communication Services, Materials, and Consumer Staples are below benchmark weight.

The Catastrophic Stop model deteriorated during the month, but entered May with a fully invested equity allocation recommendation. Financials, Industrials, Real Estate, and Utilities are above benchmark weight. Communication Services, Information Technology, Consumer Discretionary, Materials, and Health Care are below benchmark weight.

Weekly talking points and key visuals from NDR strategists' insights.

Payrolls grew in April by the least in six months. The unemployment rate rounded up to 3.9%, the highest level since 2022. Wage growth moderated, a hopeful sign for softer super-core inflation. The ISM Services PMI fell below 50. Its employment component also fell, in line with cooler payrolls. Although we lean toward one Fed rate cut this year, these reports keep the possibility of two cuts on the table.

New report identifies key breakouts and breakdowns in stocks, sectors, industries, and markets. The report has identified breakouts in MSCI China and India. Aligns with the Global Regional Equity Model, China Rally Watch, and Asia Pacific Rally Watch.

Our equal-weight Tech Titans group underperformed the S&P 500 in April, but do not blame performance on Q1 cloud sales or operating profits.

A slew of timely data out over the past week points to some softening in the economic picture. Stagflation is still out of the question. All scenarios, except for stagflation and early recession, are positive for equities.

Low jobless claims and layoff announcements reflect strong labor demand. Slower productivity growth pushes up ULC in Q1, posing an upward risk to inflation. Factory orders pick up, but y/y momentum still shows weak manufacturing activity. Trade deficit little changed in March, while the 12-month total swells.

NDR Economic Cycle Infographic updated for Q1 2024, highlighting 12 economic sub-cycles. Real GDP growth moderated, led by weaker net exports and inventories. Most sub-cycles, however, reflect a resilient expansion. Labor market strength, high-tech capex, and government spending support aggregate demand.

Upgrading cash from underweight to marketweight; downgrading U.S. from overweight to marketweight; upgrading EM from marketweight to overweight. Asset allocation change responds to Global Balanced Account Model while regional allocation change responds to Global Regional Equity Model. Evidence insufficient for expecting EM to outperform over the long-term.

The S&P 500 fell 4.2% in April, with ten of the 11 sectors declining during the month. Energy has now outperformed during the last 12 S&P 500 declines of 5% or greater. Among cyclical sectors, the sector model now favors Value over Growth by its widest margin in over a year.

The increase in the Millennial generation's wealth over the pandemic has been nothing short of miraculous. Significant gains in real estate, retirement account savings, and stable debt have helped the largest generation go from far behind to far ahead of net worth projections. Challenges like inflation and higher taxes loom, however, and could impact future spending. In this report we explore the why and where of Millennial demographic investing.

The NDR Commodity Model remains bullish though some macroeconomic indicators have weakened. Broad commodity sentiment is barely pessimistic, and China continues to show improvement. However, metals remain overbought with excessively optimistic sentiment heading into a seasonally weak period for copper, gold, and silver.

Will take longer to gain greater confidence that inflation is receding to target. Expect fewer rate cuts this year but no more rate hikes. Fed slows the pace of QT by lowering the Treasury cap to $25 billion a month from $60 billion. Treasury auction sizes to remain stable, capping the term premium and yields at last October's peaks.

Recent volatility and Fed policy uncertainty are being reflected in our models. Some model shifts have been decisive, but many have been oscillating month-to-month. Three potential position changes are bonds to cash, neutral to Value, and exiting a tactical small-cap call.

Factory activity weakens in April, led by falling new orders and slower production growth. Cost pressures rise. ADP payrolls post solid growth. Job openings and hires decline in March, but labor market still tight. Construction spending disappoints.

While many would give back financial gain to eliminate the mental pain of the pandemic, the fact is most Americans are much better off financially than five years ago. In this pandemic postmortem we focus on the financial impact where we found several positive inflection points or "pivots" for households, including a record 37% jump in real median net worth. Stubborn inflation has the potential to claw back some of the real net worth gains; however, record savings and higher home values puts households on solid footing for continued strong consumer spending.

The NDR Crowd Sentiment Poll exited its excessive optimism zone for the first time in 20 weeks, the third-longest run on record. Long optimism streaks have become more common and in clusters. S&P 500 returns have been mixed after optimism periods have ended.

The ECI jumps in Q1, feeding underlying price pressures. Confirms a delay in Fed rate cuts. Existing home prices keep rising, adding to the upside risk for inflation. Consumer confidence retreats, consistent with softer economic growth. Regional factory activity shows continued weakness.

European economic indicators support a continuation of the upward trend in European equities. Our European investor sentiment composite is now marginally pessimistic showing that the excessive optimism at the start of the year has been relieved. This, combined with robust technical indicators, suggests that recent weakness is most likely a period of consolidation within a cyclical bull market.

Since our last quarterly update, economic conditions have improved among most economies. The eurozone, U.K., and Japan are no longer brushing with recession, while growth in the U.S., China, and India remains resilient. U.S. inflation has recently diverged to the upside compared to the other economies. But country-specific upside risks could limit the amount of central bank easing we see this year.

Fed to announce a slowing in the pace of QT to $30 billion of Treasurys from $60 billion. Powell to reiterate rate cuts have been pushed out. Fed's asymmetric reaction function hasn't changed - Fed more likely to cut rates in response to employment weakness than raise rates due to sticky inflation.

The top-level equity allocation stayed at 86%. Technical and macro indicators remain positive on equities. U.S. Large Caps, Emerging Markets, and International Developed hold the largest allocations.

Though the S&P GSCI's trend moderated somewhat in April, commodity breadth has expanded in textbook fashion this year. Crude and gold remain in uptrends though both are notable for their duration without a correction. Inflation expectations have been rising along with commodities this year and contributing to the longer part of "higher for longer."

Income and consumer spending rise in March. So does inflation, confirming a delay in Fed rate cuts. Consumer sentiment cools slightly in April. Inflation expectations rise.

Weekly talking points and key visuals from NDR strategists' insights.

A week ago Friday, the Invesco Solar ETF (TAN) closed at its lowest point in nearly four years, below its pre-covid peak, and completely retracing its covid rally. Outflows are accelerating with negative industry news which may be a sign of capitulation. It's early, but TAN is on our radar as a potential rate reversal trade.

The Fed said they were running a very restrictive policy that would cause pain. Most observers believed that would lead to a painful recession. But there were many signs the policy was not as restrictive as the Fed claimed. Seven individual indicators help explain why there has been no recession.

Mega-cap tech stocks drove earnings growth in 2023 and are expected to outpace again in 2024. S&P 500 ex. Mag 7 EPS growth is expected to turn positive, and valuations suggest a lot of good news is priced into the Mag 7. Our models have begun to shift from Growth to Value, so we have Value on watch for a tactical upgrade.

Insufficient evidence for downgrading U.S. from overweight or upgrading U.K. from underweight. Along with regional model and ACWI Scorecard, watch U.S./U.K. and Tech/Energy ratios, which are positively correlated. Continuing U.S. and Tech outperformance would be consistent with ongoing cyclical and secular bull markets.

Real GDP growth moderated substantially in Q1, dragged down by net exports and inventories. But domestic demand was still strong, driving up inflation pressures. Confirms a delay in Fed rate cuts. Jobless claims continue to decline, reflecting strong labor demand. Pending home sales rise, pointing to a modest uptick in existing home sales in the near-term.

The election cycle suggests more defensive leadership in the run-up to the November election. Within cyclicals, Growth sectors tend to be weakest during election years. The Nasdaq Cycle Composite is weaker than the DJIA Cycle Composite for much of the remainder of the year, implying more Value leadership.

We highlight several indicators of credit conditions that we regularly monitor. IG and HY spreads remain tight and continue to perform well. But problems are building in the consumer and small business sectors.

Economic activity increases in most states in March. Recession odds remain low. Durable goods orders rise, led by civilian aircraft. Architecture billings decline sharply, pointing to weaker commercial construction spending ahead. Mortgage applications slide, amid a renewed rise in mortgage rates.

We maintain our long BTC position for now but should our favorite short-term technical indicator turn bearish or Bitcoin break below $61,000, we would likely downgrade.

Oversold with another higher low in sentiment, lower high in VIX. Fab Five Tape Component would confirm that a bottom is in place. U.S. Index oversold relative to ACWI.

Labor market balance has improved across industries, but a majority still show tighter conditions than pre-pandemic. Labor shortages are most pronounced in health care, financial activities, wholesale trade, and professional and business services. The labor demand/supply ratio points to an upside risk to wage growth and inflation this year.

Services activity moderates. Manufacturing slips back in contraction territory. But new home sales rebound.

Employment and demand-related indicators drive growth in March.

Reducing U.S. to a marketweight 54% from an overweight 58%. Increasing Europe and Japan each by 2%. Further increasing the Europe overweight to 32% from 30%. Reducing the underweight for Japan to 7% from 5%. Fundamentals and technicals argue against keeping the U.S. at overweight.

The Fab Five Tape Component has fallen from bullish to neutral. Big Mo Tape, the U.S. Stock Market Model Internal Composite, and a stochastic indicator are responsible for the deterioration. Watch volume supply versus volume demand for signs sellers are gaining the upper hand.

Weekly talking points and key visuals from NDR strategists' insights.

The good news is, we are enjoying better productivity now from strong IT/cloud investments made before/into COVID. The bad news is, we may need more investment and wait longer than some expect for AI to pay off.

Economic growth has picked up in late Q1. Leading indexes and our ETM suggest the expansion will continue in the near term. Stronger demand has led to firmer inflation, pushing off Fed rate cuts. On balance, the outlook is positive for topline earnings growth and stock prices.

LEI resumes its decline, but the downtrend softens. Economy continues to expand. Philly Fed manufacturing activity strengthens. Jobless claims remain low. But existing home sales drop, amid high mortgage rates and tight inventory.

Dollar, interest rates, and monetary & fiscal policy represent risks to the continuation of cyclical sector leadership. The sector model still sides with cyclical sectors over defensive sectors, but the spread has narrowed since the start of the year. Watching technical developments for signs of a defensive rotation.

Upgrading U.S. Dollar from bearish to neutral. Long-term technical composite has joined short and intermediate-term composites on buy signals. But upside potential limited by excessive optimism and overvaluation. Low volatility, inconsistencies and the lack of confirmation also argue against a bullish position.

Shifting 5% from stocks to cash for U.S. asset allocation, but still 10% overweight stocks. The U.S. asset allocation model, Big Mo Tape, and Fab Five Tape have all weakened. Economic strength, earnings growth, and long-term momentum support the case for the long-term uptrend in equities to remain intact.

While the miners look fairly valued, measures of sentiment offer a mixed message. Additionally, in the immediate term, both look overbought and are trading near resistance levels. We'd view consolidation relieving excessive optimism and overbought conditions without breaking below previous resistance levels as bullish. We have the Global X Copper Miners ETF (COPX) on watch for an upgrade. A breakout above resistance or a successful retest of previous support are likely levels for our entry.

It will take more time for the Fed to achieve greater confidence in hitting their inflation goal. Fed not considering additional rate hikes. Current policy is restrictive. Market has bear steepened. Two-year Treasurys attractive above 5.00%.

Eurozone recession risk fell dramatically in March according to our watch report. Lower inflation, rising real wages, and the prospect of ECB easing support the recovery. However, upside is limited due to weak potential growth, high ULC, and structural issues in Germany.

Short-term sentiment has fallen to the lowest level since November 2023, and ETF flows have pulled back. The Fab Five Sentiment Component just turned neutral. Relative valuations for stocks have returned to levels last seen before the Great Financial Crisis.

Industrial production rises in line with expectations. Manufacturing output picks up. Housing starts and permits drop.

Retail sales rise more than expected, driven by online purchases. Homebuilder sentiment holds steady. Business inventories rise. Empire manufacturing continues to contract.

Increasing geopolitical tensions will help keep commodity prices supported. Rising gold is a reflection of geopolitical risk and the New World Order. Implications are inherently inflationary and results in a flatter path to neutral.

Seasonal and cyclical influences now challenging. The Fab Five Tape Component has dropped from bullish to neutral, as has the broader Fab Five Model. Prospects for a recovery from consolidation are supported by improving sentiment and oversold conditions... ...but a bearish Tape Component reading would increase the chances of a correction or worse.

Weekly talking points and key visuals from NDR strategists' insights.

Modest pullback in sentiment, but level and y/y momentum still bullish for growth. Inflation expectations pick up. Import prices rise more than expected.

In thinking about rate-sensitive themes Artificial Intelligence (AI) is not one that usually comes to mind. However, the 26-week correlation between AI RS and the LT Treasury Bond Index has been significant all year.

We identify and discuss five indicators that had been warning of economic weakness for several months to several quarters. Those messages have faded, if not refuted. Supports a weight-of-the-evidence approach to economic analysis.

Commodity advance consistent with economic expansion, supporting earnings outlook. Not currently warning of 2022 repeat, with worsening inflation outlook and interest rate pressures. Commodities trending higher with gold and equities, consistent with historical tendencies.

Upgrading Financials and Materials and downgrading Communication Services and Real Estate. The changes get us more in line with the sector model's recommendations. Inflation, Fed policy, and Q1 earnings will be key in determining whether recent model trends continue.

Higher services prices drive up PPI inflation. Suggests the Fed will likely delay rate cuts into 2H. Initial jobless claims decline, reflecting continued strong labor demand.

The correlation between the Russell 2000/1000 ratio and 10-year Treasury yield is near a record low. Interest rate sensitivity is overshadowing other positive technical, earnings, and macro factors. The stage is being set for a potential small-cap rally, but the rate regime may need to change first.

Reducing bond exposure to 100% of benchmark duration from 110%. Inflation remaining stickier than expected and getting harder to dismiss. Report does not give policymakers greater confidence in hitting inflation objective. Fed to remain patient and rate path will be higher for longer.

While U.S. inflation is accelerating, elsewhere in the world it's surprising to the downside, suggesting other major central banks could cut rates first. The good news is that equities still rise and the dollar tends to weaken in these instances, as long as the Fed eventually follows. A more worrisome development would be if the Fed increases rates while other parts of the world are easing policy.

Both CPI and core CPI rise more than expected in March, led by gasoline, shelter, and other services. Super-core inflation accelerates, likely to delay the start of Fed rate cuts past June. Mortgage applications imply a slow recovery in home sales. Wholesale inventories rebound in line with expectations.

While COVID and the "patent cliff" have been meaningful setbacks for Longevity, demographics are too good to ignore this theme.

Sentiment/valuation/positioning are all mostly negative along with the Fab Five Sentiment Component. But the Fab Five overall weight with a 360-degree look at macro, tape, and sentiment indicators remains bullish. What I am watching for an even more decisive bearish sentiment conclusion.

But year-to-year momentum consistent with trend economic growth. Although small business job demand is moving toward normalcy, inflation concerns have picked up.

There is some technical evidence to suggest that the worst of Europe/U.S. underperformance has passed. This is supported by more sanguine economic surprises and downside inflation surprises. But trends in forward looking economic indicators and earnings still favour overweighting U.S. relative to European equities.

Confusing cyclical indicators can make it tough for a data dependent Fed to make the right decisions. Several indicators such as the LEI, housing, and manufacturing have an early cycle feel. Others such as real rates, employment, and credit spreads argue for late cycle behavior.

The Catastrophic Stop model entered April fully invested. The International Equity Core model is overweight Canada, China, Japan, and Germany, while underweighting the U.K., Australia, France, and Switzerland. The Explore model favors Malaysia, Philippines, Poland, Sweden, and Taiwan.

The All-Country World ex.-U.S. Total Return Index gained over 320 basis points in March. The International Equity Core model is overweight Canada, China, Japan, and Germany, while underweighting the U.K., Australia, France, and Switzerland. The Explore model favors Malaysia, Philippines, Poland, Sweden, and Taiwan.

During March, global stocks outperformed U.S. bonds by more than 225 ba sis points. The Global Allocation model's equity weighting remains above benchmark allocation. The model has an above benchmark weighting for the U.S. and Japan, while holding underweight al locations for Emerging Markets, Pacific ex. Japan, Canada, Europe ex. U.K., and the U.K.

During March, global stocks outperformed global bonds by more than 260 ba sis points. The model's equity allocation remains above benchmark weighting, with U.S. Large-Caps and U.S. Growth each receiving more than 20% allocation. The largest fixed income allocations were Emerging Market bonds and U.S. High Yield, both with more than 5% weights.

The Fixed Income Risk Management model improved during the month and entered April with a fully invested allocation to fixed income sectors. The Fixed Income Allocation model continued to favor risk-on leadership and did not rebalance. The model remained overweight Emerging Market bonds, U.S. High Yield, U.S. Investment Grade Corporate, and U.S. Mortgage-Backed Securities and underweight U.S. Floating Rate Notes, U.S. Treasury Inflation-Protected Securities, and International Investment Grade.

The Bloomberg Barclays U.S. Aggre gate Bond Total Return Index rebounded in March and breadth improved. The Fixed Income Allocation model continued to favor risk-on leadership and did not rebalance. The model remained overweight Emerging Market bonds, U.S. High Yield, U.S. Investment Grade Corporate, and U.S. Mortgage-Backed Securities and underweight U.S. Floating Rate Notes, U.S. Treasury Inflation-Protected Securities, and International Investment Grade.

The Catastrophic Stop model improved during the month and entered April with a fully invested equity allocation recommendation. Financials, Information Technology, Consumer Discretionary, and Utilities are overweight. Real Estate, Communication Services, Energy, Materials, Industrials, and Consumer Staples are underweight.

Breadth remains bullish with 10 of the 11 S&P 500 sectors posting positive price gains in March. Financials, Information Technology, and Health Care are overweight. Real Estate, Communication Services, Materials, and Consumer Staples are underweight.

The Fab Five Tape Composite remains bullish. We examine four indicators in the Tape Composite that could be next to turn negative. Even if all four weaken, the Fab Five Tape would only fall to neutral, so more deterioration would be needed to turn the model bearish.

Weekly talking points and key visuals from NDR strategists' insights.

Biggest rise in aggregate hours since January 2023. But AHE eases to 4.1% y/y, the slowest pace since the recovery began. Household employment expands by nearly 500,000, as part-time participation increases. A June rate cut is still in play.

The global economy finished the first quarter of the year on a strong note, according to the latest global PMIs. Growth continued to broaden among sectors and economies, supporting the current bull market in equities. With the strong expansion has come inflation that has struggled to come down measurably due to stickiness in services prices.

Three weeks ago, we highlighted the re-emergence of physical (natural resource) over digital (technology) themes. We continue to believe physical themes stand to benefit from "higher for longer" or "cuts fuel inflation" scenarios - but some may first need to work off some froth.

The pandemic brought a rebalance of wealth on a nominal basis to lower-income groups. Despite recent normalization, most U.S. households are still in a solid position based on savings and real wage growth, with notable strength of the middle class. Income and spending are still skewed to the wealthy.

Despite a pickup in the latest week, jobless claims remain low, as labor demand is still strong. Trade deficit widens and is projected to weigh on Q1 GDP growth. Mortgage applications slip in the latest week.

Bullish on gold with maximum overweight exposure to equities, underweight allocation to bonds and cash. Contrast to two years ago, when cash was king. Gold and equity uptrends would be threatened by yield uptrend and excessive speculation.

Markets have stumbled but liquidity drain hasn't caused a serious problem thus far. There is enough in the RRP to absorb ongoing QT and excess tax payments. If stocks and credit can continue to weather the liquidity storm over the next couple of weeks, look for further gains.

Volatility ETFs, option ETFs, and 0DTE options have some similarities to early 2018, but nuances differ. Low downside volatility, the VIX, and excessive optimism suggest the market is vulnerable to a volatility surge. Whether any vol spikes turn into a prolonged downtrend will likely depend on the Fed's reaction and macro conditions.

The NDR Commodity Model moved to its most bullish reading since September 2021. Trend and breadth improvement provide additional evidence for bulls. However, and short-term technical indicators may signal a pause to the rally is warranted.

Services PMIs show continued, but slower, growth. Inflation indicators mixed. ADP payrolls and compensation growth accelerate, a sign the labor market remains tight. State coincident indexes show broad-based expansion. Light vehicle sales edge down in March, but trend growth strengthens.

Breadth deteriorated slightly with 19 of 48 themes (40%) outperforming in March versus 23 of 48 in February. What's not to like about positive economic surprises and Fed rate cuts? Higher rates and inflation. More commodity-related than tech-related themes are outperforming as rates rise and inflation concerns grow.

The S&P 500 gained 3.1% in March, with all sectors finishing with positive returns for the second-straight month. Sector leadership was Value over Growth during the month. The sector model upgraded Financials to overweight, and we have the sector on watch for an upgrade.

Valuations continue to worsen. Shorter-term sentiment is excessively optimistic. Consumer Confidence is less optimistic, but increasing optimism toward stocks.

Job openings per unemployed come down slightly, reflecting some easing in labor market tightness. Factory orders rebound more than expected.

Broad based indicators continue to support a constructive outlook for European equities. However, rising prices imply a higher bar for earnings, representing potential downside risk should earnings miss forecasts. We highlight a series of technical indicators to watch to gauge bear market risk.

The S&P 500 is off to its best start since 2019 and 14th-best since 1926. Growth and related sectors outperformed, but Value and small-caps rebounded late. Bonds were the only major asset class to decline in Q1.

The top-level equity allocation stayed at 86%. Both technical and macro indicators continue to be positive on equities. U.S. Large Caps, U.S. Growth, U.S. Value, and International Developed hold the largest allocations.

ISM Manufacturing PMI jumps into growth territory. Cost pressures pick up. Core PCE inflation still sticky, amid strong consumer demand. Construction spending declines, led by the public sector.

The result of restrictive monetary policy can be seen through five examples. Historically, the Fed has waited a median of 7.5 months from the last rate hike to the first rate cut. We worry about inflation moving from supply side improvements to demand side risks.

The S&P 500 has risen for five straight months through March for the thirteenth time on record. The S&P 500 is above its 200-day moving average by the most since May 2021. The market is approaching overbought levels consistent with a pullback, but momentum and our models suggest the long-term trend remains bullish.

Fridays have historically been a good day for the market and the two most recent quarters have been exceptional.