– Santa rally came right on time. Risk assets rallied broadly, enough for cap-weighted US indices like the S&P 500 to set a new high.
– Stock market rally for the week was broad with all major factors and sectors advancing. Growth edged out value.
– Emerging markets moved higher but not impressively. China was flat and down more than 22% in 2021.
– Commodities bounced back as did Bitcoin, while Treasuries gave up recent gains.
– AAII Survey is improving, but daily dollar volume in levered ETFs surged to a record in December as retail investors continue with what has worked in 2021 – buying the dip.
– Global equities declined, and the US stock market was hardest hit.
– While broad indices declined, traditional safe haven sectors rallied – Healthcare, Staples, and Utilities.
– Emerging markets are down 3.6% ytd, as China fell 4.7% last week.
– Precious metals and Treasuries moved higher. So did Lumber, which has climbed more than 45% in the last month.
– Bond Momentum buy signal coincides with a peak in stock market internals and a deterioration in credits and corporate spreads
– PPI inflation accelerates in November, pushing out the likely peak for CPI inflation.
– Psychology is on the mend, but the demand for leverage persists.
%
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)
