Stocks were higher two months ago, in March. For a couple weeks, it looked as though they might lose their momentum and begin to slide in earnest. There was a week or two where I was watching very closely. However, sentiment seems to have resolved positively, and the past month looks like a line “from the lower left to the upper right,” to steal a phrase from Dennis Gartman.
Over the past week, interest rates have risen, so bond values have fallen, which has been consistent over the past month. In comparison, stocks have better momentum. A portfolio that is divided between stocks and bonds should be overweight stocks at this point. Despite the market dictum “sell in May and go away,” it looks like stocks might do alright over the coming weeks. Or maybe it’s just the last two weeks of May.
Looking at the various asset classes that I follow in my asset rotation model, I see that European stocks (XIN) continue to outperform and maintain the best outlook. Hong Kong and American stocks remain virtually tied in second place, though fairly far behind European stocks. I’m still not sure why they’re performing so well, but looking in two of my accounts, I see +21% and +17% (over a three or four month period?) and I’m not complaining.