The major European economies have tied up too much money in welfare spending and social policies making them unable to benefit from the renewed interest in European fiscal stimulus or more accurately unable to provide fiscal stimulus.
However a few of Europes economies are in a healthy fiscal situation. Germany, Sweden, Norway, Iceland, Denmark, Netherlands,...
Recent outperformance of the Polish stock market against the global ex US stock market has been something not seen in a long time and many are afraid of over valuation or high sentiment on Polish stocks however the recent outperformance has been correlated with the performance of the Zloty against the US and in essence is close to the historic outperformance of...
Euro GDP as a percentage of world GDP has been declining as the euro growth rate has been lower than the world growth rate. This trend has been correlated with euro underperformance against the S&P
EWJ outperformance lately has been related to USD weakening against JPY which has been linked with increasing Japanese yields against US yields. Likely linked with repatriation and increase in foreign flows or decrease in outflows
It seems with the increase in JGB yields we might start to see a strengthening yen. Especially with the possibility of repatriation and a "Mar a lago accord".
Plan accordingly...
Not a great chart for Utilities against the S&P. Below 200 week, might go down to historic support or even breach it. Frankly I view Utilities as bullish with the expected data center needs + electricity demand growth however a stagflationary environment can be negative for utilities and a higher rate environment as well.
A higher term premium with stable...
XLK/SPY has crossed above the 200 week moving average, secular bull market of tech is back? Might be time to get long tech to not miss the rally if it happens. Tight stop whenever tech loses its 200 week on the ratio.
The US market has consistently outperformed global markets since the global financial crisis, it has also outperformed since the tech bubble. A portion of this can be attributed to a strong dollar (many markets outperformed in local currency). However this strong dollar performance may be coming to an end.
In addition there are structural reasons why the US has...
It would be interesting to see the market bottom at the cross section of the 200 week moving average with the 2022 highs some time by June/July. Markets aren't cheap now however they are above the 200 week.
My framework:
Markets above 200dma go 100% long with base equity allocation (decrease to 90% if RSI is overheated)
Markets below 200dma but above 200 week...
Commodities look to be forming a start of a nice breakout against the S&P. Commodities are undervalued versus history and are a good diversifier for stagflationary environments. it is interesting that commodities haven't seen a stagflationary bid yet. we might see one in the near future.
Major market bottoms in 2009 and 2020 have bottomed at the following trend line for equal weight utilities against the equal weight s&p. If we continue to move down this will be one to watch for a major bottom for the equal weight S&P
Likely the gold outperformance will continue. If we don't get a bear market in stocks we likely will see a 25% outperformance of gold against S&P whereas in a recession/bear market scenario we likely will see a ~100% outperformace of gold against S&P.
In a tariff cancellation scenario + restoration of central bank trust we likely will get a 25% underperformance...
If we take the previous gold cycle move we can expect gold to reach 7K over the next few years. Gold seems to be an asset that follows the text book style technical breakout. Watch out for a retest of the 200dma at ~$2700 and rising.
200 week is at ~$2000 and rising. 200 week is probably not going to be retested anytime soon.
Surprised to see reits continue their underperformance against the S&P, I understand how most market participants view reits as a long term rate play (yields down reits up etc) however I think the market is not taking into account that reits should perform "relatively" well in a stagflationary environment. In other words reits might get a stagflationary bid.
