“Investing has always been a game of alternatives. What do we do with our money? Cash is not a reasonable answer because it is depreciating all the time. Bonds are not the answer either – with a 1.8% yield, a 10-year U.S. government bond trades at roughly the equivalent of a stock selling at more than 80x after-tax earnings. In comparison, the S&P 500 trades at approximately 18x expected earnings with a current dividend yield of 2.2%. It is worth noting that the bond’s interest payments are fixed, while S&P 500 earnings and dividends are likely to increase over time. The nature of real estate has changed – a new world is unfolding with people shopping online and working from home – and you still have limited liquidity. Sometimes the obvious answer is also the correct answer. The stock market is the obvious answer. It has generated superior returns over time. But the volatility scares most investors. Ultimately we believe that a broad spectrum of investors will reach the same conclusion that we reached long ago. After seven years of generally rising stock prices, we still have not seen the broad, enthusiastic participation that generally indicates market tops. For investors of most stripes, the stock market remains the only viable game in town – a game which many natural participants may have forgotten, but we trust will remember soon enough. And while stocks may not be cheap relative to where they trade at stock market bottoms, they remain very cheap relative to the other outlets for our hard-earned cash.” — Frederick Rowe

1. Japan Might Intervene in the Yen Currency — according to Japanese Chief Cabinet Secretary Yoshihide Suga, the recent G20 agreement to avoid competitive currency devaluation does not mean Japan can’t intervene in response to the one-sided moves of the yen. The dollar hit a fresh 17-month low versus the yen last week on expectations that the U.S. Federal Reserve would raise interest rates very slowly.
2. CP Rail Ditched Norfolk bid and Consider Buyback or Dividend — Canadian Pacific (NYSE:CP) has abandoned efforts to combine with its American railroad counterpart Norfolk Southern (NYSE:NSC). “With no clear path to a friendly merger at this time, we will turn all of our focus and energy to serving our customers and creating long term value for CP shareholders,” CEO Hunter Harrison declared. Canadian Pacific’s (CP) board will meet next week to consider using the cash lying around for a possible buyback or dividend instead.
3. US Retail Sales Down 0.3% in March vs. 0.1% Increase Expected — the Commerce Department reported that retail sales declined 0.3 percent last month after being unchanged in February. Retail sales excluding automobiles, gasoline, building materials and food services ticked up 0.1 percent last month after an upwardly revised 0.1 percent gain in February.
4. IEA Sees Oil Oversupply Almost Gone in Second Half on Shale Drop — Bloomberg, global oil markets will “move close to balance” in the second half of the year as lower prices take their toll on production outside OPEC, the International Energy Agency said. OPEC and Russia are currently working on a plan to limit their crude production. The glut is also being tempered as Iran restores exports only gradually with financial barriers to sales persisting even after the lifting of international sanctions.
5. First-Quarter Growth Slows a Bit in China –the world’s second-largest economy grew 6.7% in Q1, the slowest pace of expansion since the financial crisis, according to official data released in Beijing. That was the slowest quarterly rate since the depths of the financial crisis in 2009, but it was also exactly what economists had forecast and it was in line with the government’s target this year for growth of 6.5 to 7 percent. Economists doubt the official figures as they are uncannily stable when compared with those of most other countries. The G.D.P. data is also increasingly out of step with other indicators that suggest an even sharper growth slowdown, economists say.
6. S&P 500 Setup for Respective All-Time High of 2130.82 — courtesy of SentimenTrader
stocks enjoyed a rare kind of breakout this week. As volatility compressed over the past month, the S&P 500’s Bollinger Bands started squeezing together, and this week the index broke out above its upper Band. That was the first time in nearly 400 days it was able to do so, the 2nd-longest streak in its history. Generally, stocks did well after triggering a breakout like this after having gone a long time without one. The small-cap Russell 2000 is nearly above its 200-day average. The last of the four major stock indexes to climb above its long-term average, when the Russell ended a streak of at least six months below its average, it tended to continue to rally going forward. A new high in the Advance/Decline Line tends to lead to gains. In response to some questions regarding Thursday’s Report on the A/D Line, when it moves to a multi-year high, the S&P 500’s maximum loss at its worst point over the next year has averaged -3.9%.

The week ahead — Economic data from Econoday.com: