Revving Up For The Bull – Markets Showing Signs Of Optimism

Revving Up For The Bull – Markets Showing Signs Of Optimism

June 02, 2023

From the desk of Vance Howard:


Chart: SPY 1-year daily

Are we in a new bull market? Most, if not all, indicators are pointing in that direction. The HCM-BuyLine® is clearly positive, and pullbacks are buyable. As I wrote about last week, it is the tale of two markets: if you are not heavily invested in tech and FAANG stocks, you have basically made no money.


Chart: QQQ 1-year daily

We did break out of the two areas of resistance on QQQ, and the S&P 500 is trying to stage a breakout as well. The banking sector has held the S&P back, but banks, if the Fed doesn’t botch it for all of us, are oversold and a buyable sector.

To assess where we are with other areas and understand why this is a tale of two markets, let’s look at the Dow Jones Industrial Average, which is up a modest 3.30%. DVY, the ETF that serves as a good proxy for dividend and value stocks, is down a whopping -9%. IWM, the ETF of the Russell 2000, which is a broad index, is basically flat at 0.03% YTD, and MDY, an ETF of mid-caps, is also down -0.03% YTD.

AI has made a significant impact on the positive returns in tech and the FAANG stocks, and we expect this trend to continue. In the past week, there has been a notable, incrementally positive shift in investor sentiment towards equities. Previously, many pundits claimed that stocks were ignoring enormous risks such as the debt ceiling (which is about to be off the table), war, inflation, and the Fed’s resolve, and that fundamentals could never justify the “unsustainable valuation expansion.” However, it seems that bears are now swayed by strong 1Q23 earnings (+700bp beat). Companies are making money, and the chance of a recession has dropped dramatically.

Vance Howard

This communication is issued by Howard Capital Management, Inc. It is for informational purposes and is not an official confirmation of terms. It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to. Opinions expressed are subject to change without notice. Howard Capital Management, Inc. may maintain long or short positions in the financial instruments referred to and may transact in them as principal or agent. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. To the extent permitted by law, Howard Capital Management, Inc. does not accept any liability arising from the use of this communication. Howard Capital Management is an SEC-registered investment advisor which only does business where it is properly registered or is otherwise exempt from registration. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability. Past performance is no guarantee of future results.HCM-022223-WW05 (02/2023)

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