Where Have All the Leaders Gone?

Thursday, November 21st, 2019

And why does nobody like Japan?

Two weeks ago, we had the lowest number of net buying opportunities for individual countries since May 2000. It’s hard to be bullish about global equities as an asset class when there are so few leaders. Japan is one of just three countries which look attractive on our system, but nobody seems to care.

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Eurozone Rising

Thursday, July 11th, 2019

US investors need to take another look

The Eurozone will soon be the top-ranked equity region in both our euro and dollar-denominated asset allocation models. We think this will prompt US investors to have another look across the Atlantic. We think there are three sectors where they will concentrate their buying to start with: Consumer Goods; Industrials and Utilities. All three sectors are capable of outperforming their US counterpart and the US index as a whole.

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Message from the Black Box

Thursday, May 2nd, 2019

July is the next danger period for US equities

Our models are actually very simple but they often look like a black box to outsiders. We have three separate indicators which all suggest that July will be a dangerous period for US equities. All of them are based on the way in which our models have behaved over the last 24 years. Of course, things may be different this time. We will just have to wait and see.

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Capitulation and the rule of 35

Thursday, April 18th, 2019

Managing risk on the downside

Equity bears are capitulating. The priority is to protect their portfolios from further underperformance by getting closer to their benchmark equity weight. Our models have always shown that the worst sample periods for our process are between 29-35 weeks. The behavioural explanation would be that fund managers are allowed to be wrong for two quarters in a row, but not for three. Cutting a losing position during the third quarter of the mistake tends to be more damaging than doing it early in the second.

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Markets at a Crossroads

Wednesday, February 20th, 2019

US Industrials may give us a sign

We detect signs that the rally in global equities is losing momentum, but we could be wrong, so we are going to do nothing for the next week or two. There are signs of recovering risk appetite in EM Equities and in credit, but not in equity sector selection. Our global equity vs fixed income model is at a critical chart-point and we will look to US Industrials to provide confirmation of that message, whatever it is, whenever it comes.

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Don’t Forget the Skew

Thursday, November 29th, 2018

Plan for falling equities with violent changes of direction

Although our models are consistently bearish about the outlook for equities, we agree that there are several large problems which have depressed performance, which would allow the market to bounce if they were “solved” – even temporarily. Rather than prepare for an outright bear market, we think investors should focus on the bull/bear skew and sell countries which tend not to perform in rising markets, even though they are heavily exposed when they fall. This list includes several large Anglo-Saxon markets such as the UK, Canada and Australia.

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Top and Bottom Agree

Wednesday, September 19th, 2018

Stock-specific models show equities under pressure

Our new stock-specific models cover the US, UK and the Eurozone and they have an uncomfortable message regarding the outlook for global equities. We looked at eight companies in the US and the UK, whose profits are geared to global equity markets. Seven of them have a very low probability of beating their host index on a risk-adjusted basis, and their scores are lower than the Financials sector as a whole. Equity investors appear to believe that the outlook for equities is difficult and that agrees with our top-down models

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Can US Equities Break-Out?

Wednesday, July 25th, 2018

They may have done so already

Technical analysts are waiting for US equities to hit a new all-time high. Our model suggests that they have already broken above an important moving average relative to the total returns from cash. In local currency terms, the Eurozone, the UK, Switzerland, Australia and Canada have all done the same in the last month. Alas, Japan, China and most EMs are still a long way from the level.

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