The US economy continues to grow at a lackluster pace, first-quarter earnings have disappointed and the S&P 500 trades at stretched valuations. Although none of these factors preclude additional upside in US equities over the near term, we stand by our cautious outlook for the broader market and prefer to focus on defense.
The S&P 500 may have formed a golden cross, but this technical indicator has much different implications in the latter stages of a bull market. We also dig into the latest economic data and reiterate our call for investors to hedge their equity exposure.
Although the service side of the US economy remains healthy, manufacturing activity has weakened significantly. In fact, by one measure, the performance gap between these two segments of the economy has reached its widest point in about 15 years. We analyze this divergence and elaborate on our hedging strategy.
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