The first serious shot up towards 4,000 happened in mid February and since then stocks have been trending sideways in a fairly tight range. Never getting that low…never getting that much higher, says Steve Reitmeister, editor of Reitmeister Total Return.

This is natural outcome after stocks rallied an impressive 20% from the November lows to these record levels. Remember that the average annual market return is 8%. So again, this is a healthy pause for the market that hopefully refreshes bullish intent for the next leg higher.

Market Commentary

I think the focus is on the game plan before we hit 4,000…and the game plan afterwards. And, what will likely be the catalyst to finally have us breaking above that key point of resistance.

Last Tuesday we kicked off commentary with a discussion of the nasty sector rotation at play. Whereas tech stocks rallied the past two sessions the small- and mid-cap indices actually tanked 3-4%. Talk about a tale of two markets.

Wednesday was an interesting follow-up session where stocks bounced mightily early in the session. And as expected the previously beaten up smaller stocks led the way.

Next thing you know the rug gets pulled out again. This time mid- and large-caps are doing just fine. Unfortunately small-caps and technology were taken behind the shed for a good ol’ fashioned whooping.

Those looking to make sense of these moves are simply wasting their time. This, once again, is the hallmark of sector rotations. Swirling, twirling action, with no seeming rhyme or reason. And thus it is insane to try and chase the trends as they don’t last.

Did the relaxation of the weekend help investors snd traders come back this week with more sensible intent?


Monday was right back in the tank. That was hard to see from the -0.09% result for the S&P. But as you dig down the market-cap rabbit hole you see where the problem lies:

-1.81% for Mid-Caps (MDY)

-2.81% for Small-Caps (IWM)

And yes, the sector rotation script played out Monday with a near reversal of everything I said as to what happened on Tuesday. Meaning the S&P was painted red with smaller stocks leading the charge higher.

At this stage we have flogged this dead horse of a topic well enough. More importantly, our portfolio has weathered the sector rotation storm pretty well as we topped the S&P by 50% this week. And pulling back to the beginning of the year the lead is even more impressive:

+20.19% for RTR Portfolio

+5.39% for S&P 500

Let’s change our focus to the still improving economic picture, which tells you why the bull run in 2021 is far from over. That conversation starts with the PMI Flash report from last Wednesday at a still-searing hot 59.1.

Here we see strength from both sides of the economy: manufacturing 59 and services 60. This broad-based improvement speaks well for the more market-moving ISM reports we get at the beginning of April.

Speaking of manufacturing, there were two other regional manufacturing reports this past week that were flexing some muscle. First was the KC Fed coming in at 23. This was followed up the Dallas Fed even more impressive at 28.9. Note that anything above 0 is expansionary. And anything above 10 is a sign of good health. Clearly we are well above those marks.

Next up was a welcome drop in Thursday’s Jobless Claims at 684K. That is nearly 100K under the previous week and the best showing in a few months. This bodes well for more job gains ahead and a lowering of the unemployment rate. This equates to more income and thus more spending, which is good for broader economic health.

Let’s wrap up with the most interesting economic announcement in recent memory. Yesterday, the Consumer Confidence rose from 90.4 to 109.7. I first thought it was a typo as rarely does this report move by more than three points per month. However, as you can see from the notes below, this is the real deal:

“Consumer Confidence increased to its highest level since the onset of the pandemic in March 2020,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current conditions and their short-term outlook improved significantly, an indication that economic growth is likely to strengthen further in the coming months. Consumers’ renewed optimism boosted their purchasing intentions for homes, autos and several big-ticket items. However, concerns of inflation in the short-term rose, most likely due to rising prices at the pump, and may temper spending intentions in the months ahead.”

That last point brings us back to one of our top trends on the year and that is an improving economy = higher inflation = higher rates. For simplicity let’s say there is a lot more juice to squeeze from profiting on higher rates in the future. Plus rates can go up quite a bit from here and not really harm the attractive value equation that leads to bullish tailwinds.

Adding it altogether we are still in the midst of a healthy pause for stocks before we finally mount a lasting attack to break above 4,000.

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