Results for search of category: Market Timing

10 with 10% in China

We think that global equities could be on the cusp of switching to a new big idea, moving out of US Technology and into something else. It may be US infrastructure, depending on who wins the election and controls the Senate, but the growth of the Chinese consumer has been thrown into sharp relief by the relative impact of Covid on China vs the West. Oil at $35/bbl is a significant stimulus and a similar idea (overweight in EM Equities) worked very well in 2002-05. We have a big overweight on both Consumer sectors in China and we highlight 10 consumer-related companies in Europe which derive more than 10% of sales from mainland China.  [Read More... ]

Party Like It’s 1999

The US Tech sector has just flashed an important warning signal. Our recommended weighting has just dropped below its 52-week moving average. This has happened seven times in the last 25 years and the result is always a significant reduction in exposure. Six times out of seven, the sector has not bottomed until it was deep in underweight territory.  [Read More... ]

Signs of Life in the Eurozone

Our charts for Eurozone equities relative to the rest of the world have suddenly gone vertical. The change started in late June and the charts have improved in each of the last four weeks. It is now supported by improving lead indicators in cyclical sectors, like Materials and Industrials, and deep value sectors like Financials. The latter are key to the rehabilitation theme. Without them, a Eurozone rally will be anaemic; with them it could be surprisingly powerful.   [Read More... ]

Buying Dips & Selling Bounces

Given the likelihood of a second wave of the pandemic at some stage during the rest of this year, we have gone back through 25 years of data in over 40 countries, to see if there are any lessons about what to do in the immediate aftermath of a very bad sell-off. We find that buying the dip is not always a successful strategy and certainly not as successful as selling the bounce. By far the best strategy is avoiding the really bad weeks completely, which is easier said than done. The uplift from doing this is so significant that it dwarfs any other strategy. Even partial success is worth the effort - and the risk of missing out.  [Read More... ]

No Crystal Ball

We cannot hope to forecast all the social and economic consequences of the pandemic, but we can construct a model which allows us to observe to their impact on equities in real-time. Our new daily models are based on the same process as our weekly models. They outperformed during three similar crises in 1998, 2002 and 2008. They also suggest that US Equities will not regain their recent highs before the model reaches a point where previous mid-crisis rallies have come to an end.  [Read More... ]

Asia: First In, First Out

The recent volatility shock is as big as the one in the middle of the GFC and it isn’t over yet. It has also happened three times faster, in three weeks rather than nine. Fear is inevitable, but the are some interesting opportunities, especially in Asia. Countries like Taiwan and South Korea have managed the corona virus better than the US or Europe, while China is already recovering. If you wait for the bounce in the West, you may miss it in the East.  [Read More... ]

Chairman Mao is Coming to Dinner

Apple and Microsoft both look significantly overbought relative to US equities. Other US stocks with similar scores have underperformed by about 15% over the next three months. If this happens to the two largest stocks in the index, US equities will probably fall.  [Read More... ]

Two Week Warning

Our standard PRATER process is well-correlated with the subsequent performance of equities vs bonds. However, the relationship decays when we get close to extremes. Here, we can use a modified RSI approach to estimate the potential for mean reversion. Our 25-year data set indicates that equities are particularly vulnerable when they have been accelerating too hard (RSI) in relation to the speed at which they are travelling relative to bonds (PRATER). Presently, they are accelerating too hard, but the difference is not yet critical. At current progress, global equities will enter the danger zone in about two weeks, after which the probability of a high single-digit correction vs bonds rises sharply.  [Read More... ]


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