Last week I was concerned because stocks had lost momentum and been surpassed by bonds. The past week has been more favourable to stocks, and they now are showing equal momentum to bonds. When neither asset class has a clear advantage, it’s a time of uncertain outlook. Interest rates are low, inflation is low and economic news is not particularly optimistic. There’s an old stock market dictum that says, “Sell in May and go away.” If I had to guess, I’d say it seems likely to hold true again for this year.
Looking deeper, at the various assets in my asset rotation model, I see that European stocks (XIN) continue to dominate. In second place, for anyone investing in USD, is the S&P 500 (SPY). I continue to own XIN and remain very pleased with the performance.