The SPY, proxy for the S&P500, ended the week at $424.74, at all-time highs (about +1% for the week). The whole market has remained around its all-time highs since the massive April rally. The market has moved 20% higher since November of last year and is nothing short of astounding. Since November, the technology and energy sectors are up about 25%, while oil and financials are up more than 50%! But where did they go now?
To answer the question, we first need to ask another question. Why have these sectors rallied? It seems clear; free money exists in the USA right now. Both Federal Reserve and fiscal policy are flooding the market with cash in low-interest rates and multi-trillion dollar direct subsidies to citizens. This policy is highly inflationary, and we see it everywhere, not just in the stock market. The real estate market in Phoenix, Austin and most of Florida are up 20% from just the beginning of the year. Construction costs are soaring as well as many consumer durable goods.
However, the Federal Reserve seems intent to dismiss the apparent inflation of “things” as temporary, stating that this a result of the world economy coming out of a crisis. The Bond market agrees, sitting at 1.45% on the 10-year note. So as long as what they say is true, the answer to where we go from here is HIGHER, despite how scary it may seem. The markets will be orderly and slow through the summer, as the central thrust of the gains is likely behind us, but the momentum is higher.
The iFlip S&P500 SmartFolio (aka Tactical model) remains out of the market, i.e. FLAT, looking to buy a dip. This specific SmartFolio remains outside the market regardless of the new marginal highs, which seems contrary to my assessment made earlier. However, I have found that the A.I. SmartFolio technology is sound and has consistently outperformed personal evaluation in terms of risk/reward. Even I use A.I. SmartFolios for my investments.
iFlip has had notable Smartfolios updates. The Red Oil SmartFolio has changed its components after achieving its first profit objective, which means changing out stock positions for better opportunistic gains. The SPY I SmartFolio has made new all-time highs and is nearing its first profit objective. Most iFlip A.I. SmartFolios remain in the market and have performed well. A testament to an organized, mechanical and machine learning approach to investment.
A note on Bitcoin. It has come down significantly in May but is currently bouncing. I feel that Bitcoin is here to stay and likely represents a buying opportunity at these levels. My view is a result of a pattern that has formed. If Bitcoin (BTCUSD) closes above $42,000, it has possibilities of a rally above $50,000 in the short term. My team has already been applying A.I. to BTC and will update this group of new A.I. SmartFolios we will be releasing soon.
Until Next Time,
Kelly and the iFlip Team