The major Wall Street indices ended April higher despite closing flat for the week. The S&P 500 notched its third straight month of gains, advancing by 5.2% and up 11% for the year after hitting another record on Thursday. The Dow was up 2.7% for the month and the Nasdaq Composite higher by 5.4% in April.

The market treaded mostly sideways despite 9 out of 10 companies reporting better-than-expected earnings and the US first-quarter GDP weighing in at 6.4% – the best showing since the third quarter of 2003 – on clear signs of a robust economic recovery with 3 out of 10 Americans fully vaccinated and more businesses reopening with air travel bookings and foot traffic in retail stores rising.

Expectations are that the second-quarter US GDP may grow as much as 10%.

Despite the backdrop of a booming economy, investors were however vacillating between taking profits on stellar earnings, especially on tech growth stocks or if some of the blowout results were ‘transitory’ once the economy normalise and inflation eats into corporate margins.

In addition, there were still concerns of the Fed tapering by the end of the year or early 2022, once the economy shows signs of overheating. That was despite the central bank saying that it was premature to cut back on its monthly bonds’ purchases, which had been the driver for the massive liquidity in markets, in light of the fragile US labour market.

Then, there is also the matter of the US Congress reconvening later in the month to debate on the corporate and capital gains tax increases that will be used to fund the more expansive fiscal policies under the Biden administration – not just in traditional but also human infrastructure programmes including the $1.8 trillion American Family Plan that also covers education and childcare subsidies, which Republicans have opposed and countered with a watered-down proposal at one third of the cost.

Overall, the primary market trajectory is expected to be positive but likely choppier due to questions of whether earnings have peaked, the level of proposed tax hikes, potential rate of inflation and hence rising interest rates once the economy normalised. Most economists though do not expect the Fed to raise interest rates before 2023.

Investors will once again be listening closely at more comments from Fed officials this coming week as well as macroeconomic data especially jobs numbers to assess how hot the economy will go due to pent-up consumer demand and record savings from previous Covid relief packages.

Meanwhile, there has also been lots of conflicting news on other economic fronts with the pandemic-scarred Eurozone contracting 1.8% in the first three months of this year, pushing Europe into a technical recession. China’s manufacturing activity may have gained momentum based on latest purchasing managers’ index (PMI) numbers but the reading of 51.9 for April was well below levels recorded for much of last year.

Also lurking prominently in the background, the spikes in new waves of virus infections in emerging markets – with India and South America overtaking the US in case counts and death toll and tightening measures in more countries such as Japan, Thailand and Malaysian so as not to derail any nascent offshoots of recovery.

Investors though may not be heeding as much this year the oft-quoted market adage of ‘sell in May and go away’ for fear of missing out on reflation gains, especially from value stocks in what appears to be the front end of a new but also distorted economic upcycle due to the pandemic.

Many fund managers will have their work cut out in reassessing their asset allocation in their rotational play which include not just the US but also Europe and emerging markets and who are likely to be winners and laggards in their portfolio selection within each asset class.