– Market Risk Index moves higher, mostly on a halt in the steady improvements in the monetary composite.
– Several signs of a rebound in stock market enthusiasm this week.
– Rydex Ratio hits key level that has served as a precursor to every major correction since 2018.
– Fed steps up bond buying this week, putting a stop to yields that were creeping higher.
– In a broad move, risk assets moved higher while Treasuries declined. US Equities have taken over the lead from Treasuries for YTD return.
– Every sector and style were winners last week in one of the broadest moves since early June.
– Over 90% of the countries whose markets we track moved higher last week. However, the median ytd country return is still down more than 7%.
– Oil rallied nearly 10% last week on a falling dollar. The dollar has declined two weeks in a row after strengthening for most of September.
– Monetary conditions improve again but should level off here.
– Long Bond Momentum sell signal from August has been holding steady.
– Complacency around US equity valuations have driven return expectation on a traditional 60/40 portfolio to new lows.
– Breadth improved dramatically in the last week, and short-term investor sentiment worsened alongside it.
– At end of Q3 2020, 3 of 5 major asset classes are down ytd, and Treasuries lead all major asset classes. US Equities briefly took the lead at the end of August.
– The YTD perf spread between Tech and Energy is above 75%. This is after three consecutive years of substantial double-digit out-performance by Tech.
– Emerging markets lead developed markets year-to-date, as a weakening US dollar provided a boost to emerging market equities.
– Treasuries have been steady, with the lowest implied volatility on record, breaking the previous record from 2007 during the quarter.
%
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)
