– CPI inflation surprise of 8.6% led to a broad sell off in risk assets with the exception of commodities, which rallied on higher oil prices.
– No styles, sectors or factors were a safe-haven. It all declined.
– Emerging markets declined but outperformed developed markets on a 6% jump in Chinese equities.
– Fixed income sold off, and the US Dollar rallied more than 2%.
– US Equities and Treasuries declined, while International stocks and commodities moved higher.
– Energy was the only good sector performer. All styles and factors struggled for the week.
– A 3.5% rally in China stocks pushed Emerging markets higher.
– Crude oil was up 3.3% and is less than a 6% move from making a new high.
– Investor psychology becomes even more constructive for stock market gains on investment survey readings.
– AAII survey is approaching 2008 bearish extremes, but equity allocations remained overweight equities in May.
– An unusual Consumer Confidence combination – late cycle expectations, bullish on rates, bearish on stocks.
%
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)
