Weekly Update | April 6, 2024

The very big picture (a historical perspective): The CAPE is now at 34.55 – DOWN this week 1.68% from last week’s value of 35.14.

The long-term valuation of the market is commonly measured by the Cyclically Adjusted Price to Earnings ratio, or “CAPE”, which smooths-out shorter-term earnings swings in order to get a longer-term assessment of market valuation. In the past, the CAPE ratio has proved its importance in identifying potential bubbles and market crashes. An extremely high CAPE ratio means that a company’s stock price is substantially higher than the company’s earnings would indicate and, therefore, overvalued. It is generally expected that the market will eventually correct the company’s stock price by pushing it down to its true value. The historical average of the ratio for the S&P 500 Index is between 15-16, while the highest levels of the ratio have exceeded 30. The record-high levels occurred three times in the history of the U.S. financial markets. The first was in 1929 before the Wall Street crash that signaled the start of the Great Depression. The second was in the late 1990s before the Dotcom Crash, and the third came in 2007 before the 2007-2008 Financial Crisis.


Note:  We do not use CAPE as an official input into our methods. However, we think history serves as a guide and that it’s good to know where we are on the historic continuum.

The big picture: The ‘big picture’ is the (typically) years-long timeframe, the same timeframe in which Cyclical Bulls and Bears operate. The Sherman Portfolios DELTA-V Indicator measuring the Bull/Bear cycle finished the week in BULL status at 79.07, DOWN 2.32% from the prior week’s 80.95. We’ve been in a cyclical bull Market since April 21, 2023.

The complete picture (four indicators across three timeframes): When all four of the Sherman Portfolios indicators are in a POSITIVE status, we read the market as being in a CYCLICAL BULL MARKET.

1. DELTA-V — Positive
3. STARFLUX— Positive
4. STARPATH — Positive

In the markets:

U.S. Markets: STOCKS PULL BACK FROM RECORD HIGHS ON SIGNS OF MANUFACTURING REVIVAL. The large-cap indexes pulled back from record highs, as U.S. Treasury yields increased in response to signs that the manufacturing sector might finally be gaining traction. The market’s performance also narrowed again, with growth stocks faring better than value shares and large-caps falling less than small-caps. Energy stocks outperformed as oil prices reached their highest level since October on worries over rising tensions between Israel and Iran and a decision by major exporters to maintain production limits despite tight markets. Some late strength in Microsoft also boosted the technology sector.

The Institute for Supply Management’s (ISM’s) separate indexes of service and manufacturing sector activity seemed to play a particular role in driving sentiment over the week. Traders reported that stocks moved lower following the release of the March ISM manufacturing reading on Monday, which came in well above expectations and indicated expansion (if barely) for the first time in 16 months. More concerningly from an inflation perspective, the ISM prices paid index also surprised handily on the upside, seemingly confirming recent data showing a rebound in input prices.

Looking at the Indexes: A change from black to red this week across the board for the below indexes, with all 5 showing negative declines. The DOW and Russell 2000 taking the lead on negative movement with decreases of 2.32% and 2.96% respectively.

The Dow Jones Industrial Average saw a relatively significant decrease, dropping -2.27% to end the week of Apr 5 at 38,904.04 vs the prior week of 39,807.37. With the second week in a row of decline, the tech-driven NASDAQ index saw further loss, this week with a dip of 0.80%, closing at 16,248.52, still boasting YTD growth at +10.04%. Large cap S&P 500 finished down this week, with a -0.95% loss, closing at 5,204.34 vs last week’s close of 5,254.35. S&P 400 mid cap lost all of the prior week’s gains, declining 1.88% to close at 2,989.16 vs last week’s 2,989.16. After being the leader in gains last week, the small-cap index Russell 2000 was the largest declining index of the above group for the week ending April 5, 2024. RUT declined -2.87% closing at 2,063.47 over last week’s close of 2,124.55.

Commodities/Futures: In futures, everything saw a nice increase this week after a couple of declining weeks. Silver led the pack, while Crude Oil showed its highest closing price since late October 2023.


week CLOSE

% change WEEK 

% change ytd



+ 4.18

+ 13.30



+ 9.96

+ 15.24



+ 5.74

+ 9.28

crude oil



+ 23.23

VIX closed at 16.03 this week, a 23.21% increase over last week’s close of 13.01. In the same way as last week, this could be an be an indication that there’s now more demand and options prices may start to increase.

International Markets:


week CLOSE

% change WEEK 

% change ytd



+ 0.44%

+ 6.67%

UK – FTSE 100


– 0.52%

+ 2.46%



– 1.76%

+ 7.04%



– 1.72%

+ 8.38%



+ 1.95%

+ 3.61%



– 2.93%

+ 17.13%

The MSCI (Morgan Stanley Capital International) Emerging Markets Index saw a continues its growth streak, increasing 0.51% to close at 1,045.71 vs the prior week of 1,040.39.

U.S. Economic News:
PRICE PRESSURES FOR SERVICE PROVIDERS FALL TO LOWEST LEVEL SINCE MARCH 2020. The ISM services report, released Wednesday, appeared to ease worries around inflation concern. While still indicating expansion, the services index fell back for the second consecutive month, and more significantly perhaps, the index of prices paid fell back to its lowest level since pandemic lockdowns began in March 2020. Traders noted that the data seemed to increase hopes for a June Federal Reserve rate cut, as reflected in futures prices.

The Friday jobs report from the Labor Department, typically among the most closely watched indicators of growth and inflation pressures, appeared to further reassure investors. Employers added 303,000 jobs in March, well above expectations and the most in nearly a year. Encouragingly, from a wage pressures standpoint, the solid gains came with only a modest increase in average hourly wages, from 0.2% in February to 0.3% in March. Part of the reason may have been a solid rise in the labor force participation rate, suggesting that employers might be enjoying an easier time filling empty slots.

EQUITY AND BOND INVESTORS REACT DIFFERENTLY TO STRONG JOBS REPORT. Equity investors appeared to welcome the signs of a healthy economy in the jobs report, but the yield on the benchmark 10-year U.S. Treasury note jumped on the news; earlier in the week, it hit its highest intraday level since late November. (Bond prices and yields move in opposite directions.) After starting the week with a quiet tone, tax-exempt municipal bond yields rose broadly alongside weakness in the Treasury market, led upward by the yields on short and intermediate-term muni bonds. Amid the market weakness, traders noted that high yield municipal bonds continued to hold up well relative to investment-grade bonds.

Issuance was lighter and in line with expectations in the investment-grade corporate bond market. High yield corporate bonds traded lower amid broad macro softness following the strong ISM print. Traders also noted that the asset class experienced weakness later in the week due to increased geopolitical risks.

International Economic News: In local currency terms, the pan-European STOXX Europe 600 Index fell 1.19% during the holiday-shortened week, snapping 10 straight weeks of gains. Hawkish comments from some U.S. Federal Reserve policymakers and higher crude oil prices cast doubt on the timing of interest rate cuts. France’s CAC 40 Index dropped 1.76%, Germany’s DAX weakened 1.72%, and Italy’s FTSE MIB lost 2.13%. The UK’s FTSE 100 Index declined 0.52%.

Eurozone inflation close to target; PMI revised up; ECB reaffirms rates policy. Headline annual inflation in the eurozone decelerated more than forecast to 2.4% in March from 2.6% in February. Core inflation, which excludes volatile food and energy prices, also slowed to 2.9% from 3.1%. The year-over-year increase in service prices, however, came in at 4.0% for the fifth consecutive month.

Evidence suggests that the economy may be picking up after stagnating for the past year. S&P Global revised its estimate for the eurozone’s composite purchasing managers’ index (PMI), which includes services and manufacturing, to 50.3 in March from an initial 49.9. A reading above 50 indicates an expansion of private sector business activity.

Meanwhile, the minutes from the European Central Bank’s (ECB’s) March meeting showed that policymakers were increasingly confident that inflation was slowing to the target level in a timely manner. The majority felt that the case for rate reductions was strengthening but that it would be prudent to wait for key economic data that are scheduled to come out after the ECB’s April meeting.

UK housing market recovery picks up. Data released by the Bank of England pointed to improvement in the housing market. Net mortgage approvals reached their highest monthly level since June 2022, increasing to 60,400 from 56,500 in January.

Riksbank says currency could become pivotal in rate decisions

Minutes of the March meeting of the Swedish central bank suggested that currency developments could become more influential in policy decisions in the months ahead. The Riksbank said it is important that the Swedish krona does not depreciate further, as this could stoke inflationary pressures. The Riksbank left its key rate unchanged at 4.0% in March, adding that it might start cutting rates in May if inflation continued to slow.

JAPAN: Japan’s stock markets fell over the week, with the Nikkei 225 Index slumping 3.4% and the broader TOPIX down 2.4%. Heightened geopolitical tensions and uncertainty about the U.S. Federal Reserve’s monetary policy trajectory weighed on global equities in general, while in Japan, speculation remained rife about whether the authorities would step in to prop up the yen. The Finance Ministry reasserted its readiness to respond to excessive moves in the foreign exchange markets, as the Japanese currency hovered around the high-JPY 151 level against the U.S. dollar, its lowest level in about 34 years. Over the past three years, weakness in the yen has provided a significant boost to Japan’s exporters—companies that tend to derive a major share of their earnings from overseas.

BoJ governor signals that monetary policy could be used to address yen weakness

As the Bank of Japan (BoJ) hinted that another interest rate hike may be on the horizon, the yield on the 10-year Japanese government bond rose to 0.77% from 0.72% at the end of the previous week. BoJ Governor Kazuo Ueda signaled that the central bank could use monetary policy to address the historic weakness in the yen. Its primary concern is the impact of the Japanese currency’s weakness on price and wage growth, which have appeared to be on a reflationary trend. The BoJ targets a 2% level of inflation in a sustainable manner, accompanied by growth in wages, and asserts that monetary policy normalization hinges on these preconditions being met.

Last month, the central bank lifted short-term interest rates out of negative territory for the first time in over seven years—market participants seem to be converging around a view that two more rate hikes within the space of a 12-month period are likely. Nevertheless, Japan’s monetary policy remains among the most accommodative in the world, and financial conditions are expected to remain accommodative as well, for the time being.

CHINA: Chinese equities advanced in a holiday-shortened week, as data added to evidence that the economy could be gaining traction. The Shanghai Composite Index gained 0.92%, while the blue chip CSI 300 added 0.86%. In Hong Kong, the benchmark Hang Seng Index rose 1.10%, according to FactSet. Markets in mainland China were closed on Thursday and Friday in observance of the Qingming Festival, also known as Tomb Sweeping Day, when Chinese people honor their ancestors by cleaning and placing offerings on their tombs. Hong Kong markets were closed on Thursday but reopened on Friday.

Manufacturing activity expands for first time in six months

March’s indicators reinforced hopes that China’s economy may start to recover. The official manufacturing PMI rose to an above-consensus 50.8 in March, up from 49.1 in February, due to a rebound in production and exports and marking the first expansion since September last year. The non-manufacturing PMI grew to a better-than-expected 53.0 from 51.4 in February. Separately, the private Caixin/S&P Global survey of manufacturing activity edged up to 52.7 in March, in line with expectations and marking its 15th month of expansion.

On the monetary policy front, the People’s Bank of China said in its first-quarter policy report that it will intensify existing measures to encourage demand. The central bank pledged to maintain ample social financing and money supply to support Beijing’s annual growth target of 5% as it grapples with weak consumer confidence.

New home values continue to slump. The value of new home sales by the country’s top 100 developers slumped 49% in March from the prior-year period, easing from the 60% drop in February, according to the China Real Estate Information Corp. Sales rose 93% from the previous month, but remained weak compared with the monthly average of the third and fourth quarters of last year. China’s tumbling property sales remain a drag on the key sector for its economy and have stoked a liquidity crisis among some of its biggest property developers as they struggle to meet loan repayments.

(Sources:  All index- and returns-data from Norgate Data and Commodity Systems Incorporated; news from Reuters, Barron’s, Wall St. Journal,,,,,,,, Eurostat, Statistics Canada, Yahoo! Finance,,,,, BBC,,,, FactSet, Morningstar/Ibbotson Associates, Corporate Finance Institute)

Brandon Haines, MBA, AIF®, CFP®
Brandon Haines, MBA, AIF®, CFP®