With the S&P 500, Transportation Average, and Dow Industrials all making new 2011 highs, it is a good time to take a step back and look at the total landscape of investment options.
We stated that stocks, the dollar, and VIX were not anticipating a negative reaction to the Fed and that is exactly what we got. Some recent economic data that supports bullish outcomes for the broad market (SPY) and economically sensitive sectors:
- GDP has grown for seven straight quarters
- Inventory investment grew by $43.8 billion in Q1
- Motor vehicle sales rebounded sharply in Q1
- Chicago Fed National Activity Index (CFNAI) rose 0.26 points in March
The CFNAI correlates to slightly above-trend economic growth with limited inflation.
On April 28, we completed the update to our asset allocation rankings. The table below shows investment sectors that remain well-positioned relative to the S&P 500 Index. The results align with the current readings on the CCM Bull Market Sustainability Index (BMSI) and CCM 80-20 Correction Index in that they continue to favor bullish outcomes, especially over the next 90 days. The sectors below correlate well with what we would expect to see in the middle stages of an economic recovery, meaning more upside in the general market typically follows a sector profile similar to what we have today.
The broad ETFs that apply to the table above are:
- Mid Caps - IWP, IJK, IWR
- Retail - XRT
- Small Caps - IWO, VB
- Foreign - EWD, EWG, EWA
- Real Estate - IYR
- Commodity - DBC, SLV, GLD
- Water Stocks - CGW
- Currency - FXA
- Transports - IYT
- Energy - XLE
- Materials - XLB
- Consumer Discretionary - XLY
- Consumer Staples - XLP
- S&P 500 - SPY
As stated on March 22, with the S&P 500 trading at 1,279, we still believe the S&P 500 can reach 1,400 to 1,400 later in 2011.
Disclosure: I am long IWP, XRT, EWG, EWA, IYR, DBC, SLV, GLD, FXA, IYT, XLB, XLY, XLP. Chris Ciovacco is the president of Ciovacco Capital Management, LLC (CCM), a Registered Investment Adviser with the SEC. Chris Ciovacco and CCM and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. This commentary does not constitute individualized investment advice. We have no way of knowing reader’s goals, risk tolerance, or financial situation. The opinions offered herein are not personalized recommendations to buy, sell or hold securities.