We remain fully invested in growth stocks with accelerating earnings and sales, as we anticipate a breakout from the current consolidation zone and a move toward new all-time highs—now less than 5% away. Market participants have already digested many of the “known unknowns,” such as tariffs, which appear to have lost their shock value. With institutional investors having priced in the DeepSeek developments and tariff-related concerns, we could now be poised for a meaningful upside.
The current technical setup in the S&P 500 mirrors the double-bottom base seen in 1998. Back then, a period of sideways consolidation gave way to a decisive breakout and new highs. While no historical precedent guarantees a repeat, these patterns offer a framework for setting expectations—history doesn’t always repeat, but it often rhymes.
Importantly, the S&P 500 broke above its 200-day moving average (200dma) on April 12 and held that level again on April 23, showing strong institutional support. This support at the 200-day moving average is a healthy and normal behavior in bull markets. As long as this level holds, I remain fully invested. However, if it is retested and institutions fail to support it, I will pivot to a more defensive posture. Risk management remains paramount.
Another potential tailwind: over $7 trillion sits in money market funds. A breakout to new highs could spark FOMO-driven inflows into equities, fueling further gains. Despite negative headlines, the trendlines tell a more constructive story—and they look promising. The strength in growth stocks reinforces my bullish stance.
Japan is currently monetizing its $7.8 trillion in debt at an unprecedented pace, triggering a selloff in its long-term bonds. Yields on Japan’s 30-year bonds have surged above 3%, the highest since 1999, while 40-year yields have reached a record 3.6%. The dilemma for Japan is apparent: continued quantitative easing (QE) weakens the yen and stokes inflation while tapering QE risks spiking yields and pressuring its banking system. Compounding this is a decline in overall demand for Japanese government bonds amid growing concerns about fiscal sustainability.
These developments have global implications. Japan is the largest foreign holder of U.S. Treasuries, owning more than $1.13 trillion. Rising Japanese yields may entice Japanese investors to repatriate capital, potentially reducing demand for U.S. debt and putting pressure on U.S. bond prices. If the carry trade unwinds, it could become a headwind for global risk assets, including equities.
To maintain demand for Treasuries, the U.S. may be forced to raise interest rates—an action that increases debt servicing costs and widens fiscal deficits. Alternatively, the Fed may resort to quantitative easing (QE), which introduces renewed inflation risk. With $10 trillion in U.S. debt due to roll over by July, managing yields is critical. The recent U.S. credit rating downgrade adds another layer of complexity to the situation. Still, geopolitical considerations—such as China’s constrained position—could help balance foreign demand.
We’re closely monitoring Japanese bond yields and their potential ripple effects across global markets. While the backdrop remains fluid, the primary trend in equities remains constructive—at least for now.
Grace and Peace to Everyone!
Watch List: AER, ALAB, APH, APP, AVGO, AWI, AXON, BTSG, CHEF, CHWY, CLS, CRDO, CRS, CTAS, CVLT, CVNA, CW, EQT, GEV, NFG, NWG, OSIS, PAY, PLTR, PWR, VIRT.
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Dexter Lyons, Portfolio Manager
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