– Psychology didn’t budge this week, other than a spike in volatility.
– The yield curve slope has normalized, and it is breaking all the records…and norms.
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World Wrap
– Commodities and international equities were the only bright spots last week. Commodities continue to signal building inflationary pressures.
– Value beat out Growth. It was one of the first weeks this year where the style factor was more important than market capitalization.
– The median country return is lagging. Most international performance has been driven by China and Asian equities ytd.
– Lumber futures broke above 1,000 for the first time. Prices on 20Yr Treasuries had a rough week, declining 2.7%.
Market Outlook – Inflation is becoming more of a headwind.
– The inflation category has become one of the largest detractors from our Monetary composite.
– More euphoria records broken within investor psychology.
World Wrap
– A strong week for all risk assets except Treasuries. Commodities lead all asset classes year to date.
– One of last year’s big laggards, small caps, are off to a strong start. The same can’t be said for value, which is running even with growth.
– The out-performance gap between Emerging and Developed markets widened.
– A down dollar sent commodity prices higher. The coming week may be key to see if the dollar can put in another higher low.
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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%
- Monetary 87.2%
- Valuation 99.3%
- Market Trend 9.8%