Trading Strategy
Since Fed Chairwoman Janet Yellen testified to Congress mid-month, a run-up has taken over in both bonds and stocks. Yellen’s note of caution over months of lackluster inflation has led investors to expect a slower pace of monetary tightening that could extend this “Goldilocks” environment that supports both assets. In the updated chart below Financial stocks are moving higher on expectations of hawkish commentary from tomorrow’s FOMC announcement. Stocks in the Materials sector appear be benefitting from the weak dollar which helps companies that export goods. Tech stocks remain hot ahead of the upcoming earnings announcements from big technology companies. Don’t hesitate to cash in gains with valuations at such lofty levels and be ready to buy the next pullback.
