– Equities rallied, and bonds & commodities declined. US equities widen performance lead over other asset classes.
– WSJ reported that overlap in top 50 holdings in mutual and hedge funds is near record levels as pros have piled into the same outperforming names.
– US & China set to resume trade talks this week. Low expectations for any substantial breakthroughs.
– Fed expected to cut rates by 25 basis points on Wednesday. Uncertainty is building about what likely policy will be after that.
– Market Risk Index climbs to 82.4 after investor psychology hits worst 10% of readings.
– Psychology readings and recent Hindenburg Omen increase odds that the summer rally is over.
– Monetary score drops again. Headlines that money market fund assets are surging are not what bulls should hope for…
– US Equities and commodities sold off last week. International Equities and bonds were flat. Busy earnings week with 145 S&P 500 companies due to report.
– Small caps continue to struggle, close to challenging a declining 200dma. Worst ytd under-performance by small caps since the Internet bubble in 1999.
– US trade delegation set to meet with Chinese counterparts in China next week for trade discussion. Public unrest in Hong Kong continued for seventh weekend.
– Fed is signaling a 25-bps cut is likely at the July meeting. Little consensus for 50bps cut. Budget and debt ceiling deal nearly complete.
Market Risk Index breaches 80 on downgrades to psychology, monetary and valuation.
Investor psychology likely to breach lowest 10% of readings within the next couple of weeks, which will likely mark the end of the summer rally.
A Fed rate cut later this month is about maintaining very elevated investor confidence – a tall order.
%
Market Risk Index scales from 0 to 100%. Higher readings correspond with higher risk markets. Scores below 25% are bullish. Scores between 25-75% are neutral, and scores above 75% are markets vulnerable to major drawdowns.
Model Category Readings (Percentiles)
