Global Stock Markets Regain Momentum

Global stock markets resumed their slow and steady summer “melt up” last week. The Dow Jones was up 0.82%, the S&P 500 rose 1.20% and the tech-heavy NASDAQ jumped 2.49%. Global stock markets trailed the pack with the MCSI Emerging Markets Index rising 0.44%.

Big gainers in your Alpha Investor Letter portfolio included Las Vegas Sands Corp. (LVS), up 3.96%; Google Inc. (GOOGL), rising 3.31%; the Vanguard Russell 2000 Index ETF (VTWO), gaining 2.83%; the Market Vectors Biotech ETF (BBH), adding another 2.83%; and The Blackstone Group L.P. (BX), recovering 2.79%.

Las Vegas Sands Corp. (LVS) also moved back above its 50-day moving average and is back to a BUY.

Several of your positions hit new 52-week highs. These include the WisdomTree Japan SmallCap Dividend (DFJ), the Global X Guru Index ETF (GURU), the PowerShares Buyback Achievers (PKW) and the Vanguard Russell 2000 Index ETF (VTWO).

Based on the performance of the last two months, my previous worries about “sell in May and go away” appear to be unfounded.

U.S. stocks closed out yet another quarter with a gain. The S&P 500 added 4.7% and most other broad indexes managed a gain as well. That makes six straight quarterly gains for the S&P, as well as an all-time high. For all of the handwringing about the market, it’s hard to ask for a much better performance streak than that.

Historically, such momentum in the U.S. stock market bodes well for the coming two quarters — though the July through September quarter is rarely particularly strong.

According to research on SentimenTrader, if we assume away the Dow’s less-than-1% loss in Q1, then the current streak would mark the 11th time since 1900 that stocks managed to gain six straight quarters and score at least a five-year high. Over the next two quarters, the Dow added a median of +6.6% to its value and gained eight out of the 10 times.

The market’s terrific streak notwithstanding, investors aren’t exactly partying like it’s 1999. In fact, the market’s recent run has been greeted with outright skepticism. That, I think, is a bullish sign.

At times like this, I am always reminded of one of my favorite quotes from Sir John Templeton:

“Bull markets are born on pessimism, grown on skepticism, mature on optimism and die on euphoria.”

And I think we are very far from a state of euphoria…

Portfolio Update

Google Inc. (GOOGL) gained 3.31% last week. Google wowed the world last week when its management unveiled several new products and initiatives at its annual Google I/O conference. Over the coming months, you will see new technology in vehicles via Android Auto, new wearable technology via Android Wear and experience a revolutionary new way to interact with your television via Android TV. Google also announced its next mobile operating system, Android L, which includes revolutionary new user-interface guidelines known as Material Design. Google should profit handsomely in the coming quarters, as these innovations will bring many millions of new users to Google’s ecosystem and advertising realm. GOOGL is a BUY.

First Trust US IPO Index (FPX) added 1.81% as it continued its winning streak. FPX has been gaining steadily over the previous weeks, rising nearly 9% since bottoming in mid-May. The 2014 initial public offering market (IPO) remains hot as the top ten 2014 IPOs are up better than 100% for the year. FPX remains a BUY.

WisdomTree Japan SmallCap Dividend (DFJ) rose 2.28% and spiked to a new 52-week high over the past two days. Japanese small caps have been on fire over recent weeks as the Japanese recovery continues. Spurred on by both continuing economic stimulus and a weakening yen, small caps are leading Japan’s large-cap equities, as they historically tend to do. DFJ is a BUY.

Market Vectors Biotech ETF (BBH) added another 2.83% this week after experiencing a superb gain last week as well. The recovery in the biotechnology space has firmly taken hold over previous weeks, following a huge correction a few months ago. I recommend buying on any dips at these levels. BBH is a BUY.

Global X Guru Index ETF (GURU) gained 2.10% last week and hit a new 52-week high just yesterday. Buying what the hedge funds have been buying has been paying off over recent weeks, as GURU has been a consistent winner since it hit the 200-day moving average back in early April. GURU remains a BUY.

The Blackstone Group L.P. (BX) rose 2.79%. Blackstone is planning to launch a new hedge fund business this fall, and its investment plan has lofty goals. Word has it that this new business area will rival other large firms in the industry and focus on just a few large and carefully selected investments. BX will report earnings on July 17 before markets open. BX is a BUY.

Las Vegas Sands Corp. (LVS) gained 3.96% over the past five trading days. Prime Minister Shinzo Abe made statements recently on the legalization of casinos in Japan as yet another way to bolster the economy. This has been pushing gambling stocks higher. LVS rose past the 50-day moving average last week to become a BUY.

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