U.S. equities are now just about even with where they were back in the first week of June last year. Although not much has changed with regard to the price of the index, beneath the surface there has been a monumental shift with regards to both sector strength and sentiment. In the early summer of last year momentum stocks, most notably in the technology and communications sectors, were seemingly impenetrable. Each weekly close saw a new higher price and money flooded indiscriminately and relentlessly into whatever stock was the flavor of the week. At almost the exact same price point in the S&P 500 index this first week of June, most of these same stocks have been cut in half and some are down more than 70%. There has been plenty of volatility during this time period, but by just taking a snapshot of where price has gone in a year, we are given some perspective on how different this time period has been for the individual investor, depending on how their money was allocated. While these high momentum growth names have fallen off a cliff, commodities, namely energy which is up over 60% during this time period, continue to be the leaders in this new market environment.
It is important to recognize that, even though U.S. equities have returned to the same place they were a year ago, the trends in the assets that make up the index have shifted most dramatically. The U.S. Dollar and commodities remain the two most important assets in the world. Will commodities continue to lead the way higher as oil prices surge into the summer? Will the dollar continue to rise and break out of the key price point we noted in our blog post at the end of last month? As of the close last Friday, energy made a new weekly closing high but the dollar showed a bit of weakness, pulling back from the highs from last month. Has something finally changed or was that short selloff the entire move? The implications of a shift in either of these on-going trends will reverberate through the market and set the tone for the remainder of the summer.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. All investing involves risk including loss of principal.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.