– US Equities rallied as the VIX closed below 19 for the first time since the pandemic began. Intl equities and commodities declined.
– Cap-weighted sector and style indices masked the weakness across small and mid-cap stocks last week, as both small and mid-cap stocks declined.
– Chinese equities declined by more than 4% last week and are down ytd. Twitter rumors circulating that a major Chinese family office was forced to unwind.
– Treasuries staged a modest rally last week. Meanwhile, the US Dollar continues to trend higher after bottoming in early January.
Archive
Market Outlook – Overconfidence is Pervasive
– Market Risk Index ticks up to 96.6%.
– Psychology hits 100% again.
– Data-mining valuation to curve fit our way into giving valuations the benefit of the doubt.
World Wrap
– Commodities sold off on a 6% drop in crude oil prices. International equities were the only asset class that managed to squeeze a positive return from the week.
– No more love for Growth. Large growth stocks are still in negative territory year to date.
– Emerging market gains have slowed as Chinese equities have spent the month of March in an official correction.
– Long duration Treasuries have entered a bear market after falling more than 20% from their 2020 peak.
Market Outlook – The Inflation Narrative isn’t going away.
– Market Risk climbed to 96.5, after the Monetary Composite breached the 90th percentile.
– The Inflation category is now the largest headwind for the Monetary composite.
– Philly Manufacturing Prices Paid Index climbs to the highest level in 40 years.
– Bond Momentum not giving the all-clear for Treasuries.
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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%