Euclid Investment Advisory Blog

Review & Analysis at Close May 10, 2021

Comments

It appears the bump up this past Friday in Large Cap Growth and Tech stocks was a selling opportunity as both declined today, continuing their respective trends since late last month. The huge miss in Friday's Jobs Report (260,000 reported vs. 1,000,000 expected) might suggest that the economy may not be as vibrant as was assumed and that the threat of higher interest rates is moderating - and that would be a positive for Growth stocks.

Nevertheless, the US economy is looking to expand over the next four to eight quarters. We expect Value stocks to beat Growth stocks in this environment. The Federal Reserve has kept interest rates near zero for a year and has signaled rates will not change for at least two years. Additionally, there is a huge fiscal stimulus proposed by the Biden administration. Whether due to supply chain problems or excess demand, inflation fears are seen in current shortages of materials and labor. A some point the Bond Vigilantes will step in to “Fight the Fed” in the form of a buyers strikes. If inflation comes to the fore, bonds will lose value as interest rates rise, and most impacted would-be growth stocks.

Equities

The S&P large, mid, small cap and Europe indices remain strategically Bullish. Nasdaq Composite and Emerging Markets on Bear Alert. China stock index rated Bear Market. Bear in mind China has the second largest economy in the world. Asian contagion?

  • Equity Styles: Large Cap Value now stronger vs. Large Cap Growth. Large Cap Value gaining vs. Small and Mid-Cap indexes. The S&P 500 Equal Weight leading the S&P 500 Cap Weight Index.


  • Ranked Sectors: Trend Leaders - Energy, Financials, Transportation Industry Group, Materials Industrials; Laggards - Health Care, Consumer Staples, Utilities, Technology.

Interest Rates

The 30-year US Treasury Bond and the 10-year Note Yield declines appear ending, nearing rising long term trend lines. The Yield Curve is positive with spread moving sideways, nearing rising trend line.

Currencies

The Australian Dollar, the Euro ,and the British Pound all strengthened in Bullish trends; Yen is Bearish. Gold now strategically Bullish.
The US Dollar is strategically Bearish, nearing Feb 25, 2021 low.

 

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