Archive

Market Outlook – The yield curve is on the cusp of inverting again

Market Outlook – The yield curve is on the cusp of inverting again

– Market Risk drops modestly on improvement to monetary conditions.
– Falling yields have helped monetary conditions, but they’ve also pushed the yield curve close to inverting again.
– Investor psychology managed to make another cycle extreme. Last week from options traders, this week from levered fund investors.
– Commodity price trend turns negative, and Dr Copper is growing nervous.

World Wrap

World Wrap

– Global stocks dropped 1% last week, and commodities by nearly 4%. US Treasuries and REITs rallied. REITs lead all other asset classes.
– Momentum stocks held up while value and dividend stocks struggled. This is the largest growth over value gap to start a year since 2009, and prior to that, 2001.
– While virus news has rarely had a lasting impact on markets, Coronavirus news has markets skittish. 3,000 cases in 10 countries, with 5 confirmed cases in the US.
– Oil prices & energy stocks were hit particularly hard last week, giving commodities their worst start since 2018 and their third worst start in nearly 30yrs.

Market Outlook – Options speculation setting new records

Market Outlook – Options speculation setting new records

– Market Risk Index flattens out as psychology composite finally stops deteriorating.
– Activity in options markets is so extreme its setting new sentiment high water marks for future bull markets.
– Fed’s $400 billion repo injection has led to a rollover in M2 and MZM growth and halted the yield curve’s re-steepening.
– Lots of charts of stock market extremes…

World Wrap

World Wrap

– REITs rallied over 2.5% to become the 2nd best performing asset class ytd. US Equities have climbed 13 of the last 15 weeks. Commodities declined.
– Large Growth continues its style/factor dominance, driven higher by the Technology sector. Dividend paying stocks have had a sluggish start in 2020.
– News of the Wuhan Pneumonia virus, originating in Central China, is spooking global stocks this week.
– Central banks of Britain, Euro zone, Japan, Sweden and Switzerland announce cooperation in researching their own digital currency issuance.

%

Market Risk Index

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)

  • Psychology 99.7% 99.7%
  • Monetary 87.2% 87.2%
  • Valuation 99.3% 99.3%
  • Market Trend 9.8% 9.8%