Last week, we highlighted Bob Farrell’s 10 Rules for Investors, with particular attention to rule number seven: Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names. In other words, breadth matters — bulls want to see broad participation in uptrends. We were careful to note that there was no immediate cause for alarm.
This week, we turn to another timeless truth: you can’t argue with new highs. And there are quite a few worth noting.
S&P 500
The S&P 500 continues its relentless march higher from the April lows, reaching a new all-time high last week above a steadily rising 60-week moving average. Notably, the index closed the week at the top of its range — a sign that investors were willing to “go home” long equities.
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Source: Optuma
NASDAQ 100
The NASDAQ 100 Index also traded to a new record high last week and remains well above its rising 60-week moving average. While it didn’t close at the top of its weekly range, it did register a new weekly closing high — surpassing the prior week’s record.
Source: Optuma
Rest of the World
U.S. investors tend to maintain a disproportionate allocation to domestic equities — a well-documented phenomenon known as “home country bias.” Over the past decade and a half, that bias has served them well, as U.S. markets have dominated global performance.
But it may come as a surprise that the MSCI ACWI ex-U.S. Index Fund (ACWX) is now in a strong uptrend. The fund ticked to a new high last week and, like the S&P 500, closed at the top of its range.
While the new highs are noteworthy, we’re even more interested in the relative performance. ACWX is quietly attempting to reverse a long trend of underperformance and is holding above a flat 40-week moving average. It’s early days, but we’re intrigued. One could argue that the average U.S. investor is not positioned for a period of sustained outperformance by the rest of the world.
Source: Optuma
Final Thoughts
Key market measures closed last week at new highs. In the U.S., much of the attention will center on the S&P 500 and NASDAQ 100 — and rightly so. But we would be remiss not to highlight that the “rest of the world” is participating as well. More than that, it’s attempting to reverse a long-standing trend of underperformance. If it succeeds, many investors may find themselves caught off guard.
Dan Russo, CMT
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