Stocks surged last week with the S&P 500 up 2.1% on the week and at a 4 month high. While the week showed significant weakness midway, Friday served as an exclamation point, confirming a technical breakout. The S&P’s surge was broad-based with consumer discretionary stocks advancing 2.9% and small caps adding 3%.
The FOMC announced that they will leave the Fed funds rate unchanged and they anticipate economic activity to require current low rates for an extended period of time. Of course, low rates and extremely low inflation will continue to produce low yields for fixed income investors. Low rates will also postpone the day of reckoning which awaits bond investors who are not prepared for inflation, higher interest rates or deflation.
Market sentiment continues to improve as productivity gains generate higher profits for big companies. This is likely to continue as corporations remain hesitant to re-hire employees who were displaced during the recession.
Market data have improved significantly this month, with last week showing technicians a strong break higher in the range-bound trading pattern of the last year. HFI Wealth Management’s “Advance & Protect” investment strategy allows us to make adjustments to a client’s portfolio strategy (within the limitations set forth by the agreed investment policy) to increase or reduce exposure to various asset classes based on technical research performed by our research vendors. Our clients are aware that earlier this year we reduced exposure to stocks, particularly Emerging Markets, US Large Cap Growth and Small Caps. With positive market momentum confirmed this month and particularly last week, we will begin to reintroduce these equity asset classes.