This week’s recap is going to be shorter than most, partly because I think no one really needs huge tables full of data and because I’m feeling very frustrated. The goal had been to convert the weekly recap into a one sheet download you could use to help get the week started on the right foot but after discovering that Scribus is a lot harder to use than I anticipated, we’re going back to the old format for at least one more week. I used to be pretty handy with Pagemaker, but that was about four jobs and close to a decade ago. Getting old sucks.
Last week continued the August 8th rally and has us knocking on the door of 2000 for the S&P 500. Keeping it to the highlight reel, the chart below shows the action was clearly in favor of domestic midcaps as anything with even of whiff of foreign exposure was left in the dust. Fears over Russian invasion helped lift RSX to a positive week as value investors, bottom feeders or some combination of the two came to bite while developed Europe/Asia lagged. I personally am looking forward to the coming lynching of all economists in Europe after their disastrous experiment in fiscal austerity DURING a recession. Assuming they can remove their collective heads from their a$#es, equity returns could be higher going forward. China continues to consolidate after a strong three months.
So what happened? Janet Yellen said absolutely nothing that she hasn’t said before and the market loved it. Remember, the FED is still tightening and talking about accelerating their time frame, but for this immediate moment, the market couldn’t care less. Even TLT rallied on the news to close at the high of day and recover some lost ground on Thursday and Friday. And war in the Middle East? Tell us something we didn’t already know.
For those trying to play a particular tilt with domestic stocks, Midcaps clearly outperformed last week and with a slight growth slant. As you can see, there’s a clear distinction between the leaders and laggards among domestic sectors last week…something about the last shall be first comes to mind. The blue bars represent the weekly return (LHS) while the red line (RHS) indicates the percentage of the YTD return that has come over the last 3 months.
Tech stocks continue to pound higher as Apple drags the rest along kicking and screaming. Consumer discretionary has come from the dead zone to positive YTD while early favorites like real estate and utilities languish. Utilities have in fact run up against their 50 days MA and need help pushing higher from here…right into the possible right shoulder we discussed last week.
So what happens next? Probably nothing exciting. It’s a busy week with durable goods, consumer confidence, personal income and a host of other things that no one will pay attention to five minutes after it’s released. Between back-to-school shopping and Labor Day, people are distracted so this week might be more of the same with a smaller advance. Tech stocks (using XLK as a proxy) are a point where momentum usually tends to reverse itself, while utilities and energy stocks are stuck in irons and looking for something to give them a push one way or the other. In fact, the week could be shaping up to be boring unless some Russian conscript decides to fire off a few rounds in the wrong direction.
And if you really want excitement, check out Carl Richards latest post on why that’s probably a terrible idea.