We have discussed the last couple weeks about ‘green shoots.’ Today we have some further evidence of these tender little buds.
The first is our favorite index, the S&P 500 equal weight. It has just climbed above it’s 200 day moving average relative to the traditional cap-weighted S&P 500 index for the first time in 2 years. Will it stay like that? Tough to say at this moment, as it could dip back below it in the coming days or weeks, but it’s an encouraging sign, nonetheless. As of right now, we will count that as another green shoot. At some point we will have enough shoots and will be far enough along in the recovery that the chance of a ‘hard freeze’ is negligible.
Continuing, we can see that most individual investors are very bearish (as seen in the AAII survey below). Four weeks in a row of very negative sentiment. It’s enough for at least a short-term reversal in the indexes. And we are seeing that over the last couple days. Will that last? Only time will tell.
Meanwhile the FED came out with their rate decision and, to nobody’s surprise, kept rates unchanged. In their follow-on statement, they lowered expected growth rates for this year, while continuing to say that they will cut rates by a half point this year.
There’s no question that the tariff talk is providing some angst in the markets and the economy, as one day they are going forward and the next day they are on hold. The market is trying to price in these potential tariffs and the assumed corresponding slowdown in the economy as a result.
If we look at CPI data, that number is back to 2% if you take out shelter.
And Truflation has the inflation rate under 2%.
Finally, international markets are vastly outperforming US markets so far this year. We talked previously about this potentiality. It wouldn’t surprise me to see this continue much like the period from 2005-2010. As with everything in the market, time will tell, but such trends do tend to emerge when seemingly everyone has given up on a particular idea – international investing being that idea this time around.
Wrapping up, I hope your March Madness brackets are still in one piece. I know most aren’t, but I guess that’s what makes the whole bracket thing fun in the first place. If you have any questions or are losing any sleep, please reach out and we will be happy to have a conversation.