The U.S. markets have steadily risen the past 3 months, continuing to ignore the old “Sell in May” adage. The economic data, leading indicators, and technical indicators have all strengthened, which has resulted in our continued bullish but cautious stance.
Adding to our bullish stance is that one leading indicator we monitor is particularly close to a breakout on the upside. If a breakout does in fact occur, it will only be the 35th time it has done so in the past 52 years. When a breakout has taken hold in the past, the S&P 500 continued to move higher over the following 6 and 12 month periods respectively over 80% of the time. Even more encouraging is that 24 of the 35 breakouts have been followed by the S&P 500 increasing more than 10% during the next 12 months.
Now for the cautious side – 5 of the last 8 bear markets have started within 12 months of a breakout of the aforementioned leading indicator. However, the losses in those instances were mitigated by the previous run-up, with the worst 12-month loss being only 6.5%.
We are currently keeping our client portfolios as-is after rebalancing over the past month, though we continue to closely monitor the markets for any signs of weakness in light of this bull market marching on for an above-average length of time (6+ years).
As always, please contact us at 913.402.6099 if you would like to discuss your current investment strategy and receive a free analysis of your portfolio from an unbiased Kansas City Financial Planner.
John P. Chladek, MBA, CFP® is the President of Chladek Wealth Management, LLC, a fee-only financial planning and investment management firm specializing in helping families and couples who are not yet retired realize their financial goals. For more information, visit https://www.chladekwealth.com.