One of the benefits of tracking a portfolio like Rotational is that the data provides a real “global macro” big picture. Not to mention that the portfolio was on a tear for the month of May! Some things that came up during the analysis …

Bonds, as an asset class on average, still have some positive momentum, but notably the least momentum since I’ve been publicly tracking this system. The “flight to quality” is definitely over. One could say that the lowering in price for longer-duration Treasuries is a response to “fear of inflation,” but the look at commodities may be instructive there.

The negative change in momentum for Commodities is the largest of any class. If the lowered prices and increased yields on Treasuries were the result of bubbling “inflation fears,” why then would the metals and agriculturals be losing steam?

The two biggest losers are the Swiss Franc and the Yen, and the biggest gainer in momentum is the DBV “carry trade” tracker. This shows a clear dissipation of fear, as the search for yield and the embrace of risk-taking has returned to the market in spades.

Of the asset classes with significant increases in momentum, the foreign stock markets are the second strongest gainers. Only four of the twenty-five foreign nations I track have negative momentum, and three of those are showing improvement.

In the month since my last review, every single domestic industry tracked, except for two, has gained in momentum. The biggest gainers are telecom, the semiconductors, and almost anything related to energy and raw materials. Semis are in positive momentum territory, as are wireless telecoms, and the energy and materials industries have some shining stars among them. The “safe” industries of health care and consumer staples did have momentum gains, but only barely, nothing compared to the gains of the cyclicals, electronics, or brokers industries. Whether or not a “recession” is actually coming, it is pretty darn clear that the market is betting there isn’t going to be any “recession.”

[To view the Rotational portfolio selections, results, and allocations, along with the rest of my notes, read more…]

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