Last week, we discussed that the April correction was likely over.
“Notably, the breakout above key resistance and the reversal of the volatility index suggest that the recent correction is over. However, while the April correction may be over, as noted above, there is still a decent probability of another correction before the Presidential election in November. As shown below, such tends to be a statistical normality during Presidential election years.”
This past week, markets surged to all-time highs as a plethora of bad economic data and a weaker-than-expected inflation print lifted hopes of Fed rate cuts in the coming months.
From a technical perspective, the markets remain on a current MACD “buy signal” and have cleared all previous resistance levels. Furthermore, the 20-DMA is set to cross above the 50-DMA next week, providing additional support to any short-term market correction. We should expect a pullback or consolidation with the market overbought on multiple levels. Such consolidations will provide a better entry point for investors who need to increase equity exposures.
At some point, most likely before the election, we will get a deeper correction to retest moving averages. However, the market will likely give us a fair warning to begin a risk reduction process
For now, continue to remain predominately weighted in US Large Cap (S&P 500) markets. Money flows, due to passive investing, will continue to keep those stocks elevated.
As we get further into the New Year, we will be able to better recognize where money and allocations are rotating to and make further recommendations for there.
If you are close to retirement or are concerned about a pickup in volatility, there is nothing wrong with being very underweight equities. It is better to be safe than to give up dreams of retirement to rebuild lost wealth.
Last week, we discussed that the April correction was likely over.
“Notably, the breakout above key resistance and the reversal of the volatility index suggest that the recent correction is over. However, while the April correction may be over, as noted above, there is still a decent probability of another correction before the Presidential election in November. As shown below, such tends to be a statistical normality during Presidential election years.”
This past week, markets surged to all-time highs as a plethora of bad economic data and a weaker-than-expected inflation print lifted hopes of Fed rate cuts in the coming months.
From a technical perspective, the markets remain on a current MACD “buy signal” and have cleared all previous resistance levels. Furthermore, the 20-DMA is set to cross above the 50-DMA next week, providing additional support to any short-term market correction. We should expect a pullback or consolidation with the market overbought on multiple levels. Such consolidations will provide a better entry point for investors who need to increase equity exposures.
At some point, most likely before the election, we will get a deeper correction to retest moving averages. However, the market will likely give us a fair warning to begin a risk reduction process
For now, continue to remain predominately weighted in US Large Cap (S&P 500) markets. Money flows, due to passive investing, will continue to keep those stocks elevated.
As we get further into the New Year, we will be able to better recognize where money and allocations are rotating to and make further recommendations for there.
If you are close to retirement or are concerned about a pickup in volatility, there is nothing wrong with being very underweight equities. It is better to be safe than to give up dreams of retirement to rebuild lost wealth.