While financial media was focused on the G-7 talks and other geopolitical issues, stocks continued their march higher. Interest rates were up only modestly, but Financials (seen as benefiting from rising rates) rose while Utilities (sometimes viewed as a proxy for bonds) fell. International stocks lagged despite modest losses for the dollar.

Weekly Returns

S&P 500: 2,779 (+1.6%)
FTSE All-World ex-US (VEU): (+0.5%)
US 10 Year Treasury Yield: 2.95% (+0.05%)
Gold: $1,299 (+0.5%)
EUR/USD: $1.177 (+0.9%)

Major Events

• Monday – the NASDAQ set a new high for the first time in three months after tech stocks stumbled in March.
• Wednesday – Tesla stock rose over 10% after Elon Musk said the company has turned a corner on production of the Model 3.
• Thursday – A report from the Federal Reserve showed US household assets topping $100 trillion for the first time.
• Thursday – The Canadian Senate passed a bill that would legalize recreational marijuana. It will now go back to the House of Commons.
• Friday – President Trump said Russia should be allowed back into the G-7.
• Friday – Ant Financial raised $14 billion, giving it a valuation of about $150 billion.

Our Take

For the year, the tech sector is up a little over 12% while the S&P 500 is up a little less than 5%. That means tech accounts for about 60% of the gains. Amazon and Netflix are technically classified as consumer cyclicals. If you consider those tech, the sector would account for nearly all of the gains this year. It is also the leading sector over the last month. Basically, the stumble in the tech rally in March after Facebook’s data scandal is over. Big tech will likely face increasing regulation, but that will take a long time to have any impact.

Recently, it feels a lot like 2017. Stocks are going up, volatility is relatively low, and growth is back to beating value. For the short term, that may be a good thing – 2017 was an enjoyable year to be an investor. Eventually, cycles always rotate. The longer and stronger they are, the more disruptive it is when the tide shifts. But the most likely outcome for the short term is usually whatever the longer term trend has been.

Guessing the timing of major trend changes is nearly impossible. We don’t know when the bull market will end, or when value will regain leadership. The same is true when looking at the US and international cycles. The US is leading this year because it has more tech and because of a stronger dollar.

Investors who stay diversified globally and across sectors should do fine regardless of the timing. Those that rebalance by taking some profits along the way and using proceeds to buy things that are out of favor should fare better still. Those piling on late face the biggest risks.