To The Moon

This week’s COTW is… 2 Charts! First one shows Global ex-US Small Value (basically a combination of what have been the 3 most out of favor parts of global equities: global ex-US, small caps, and value stocks). The second one shows the other side of the coin — US Large Growth (what has been the hottest part of global equities). The chart on the left is looking very bullish after being messy, somewhat bearish, and certainly lagging behind for a number of years. The chart on the right is looking distinctly bearish after having been on a dream bull run since 2009. Then add in a little more context: global/small/value are ticking up from record low relative valuations vs US/large/growth — what I call the “relative value trinity“ of global equities. This is a classic change in stockmarket leader

Learnings and conclusions from this week’s charts: The S&P500 $S&P 500(.SPX)$ dropped -0.87% on the month in February. (yet the equal-weighted version gained +3.4% in Feb) (rotation remains a key theme) Value vs growth rotation has clear fundamental support. There are still some compelling causes for optimism. Overall, the rally in cyclicals/value is helping offset tech-troubles (aka bullish rotation), and there is clear compelling macro-fundamental support to rotation (along with the cooling-off from tech/AI hype). We’re probably seeing a classic case of overinvestment in capex on the AI front, but it’s not all bad news… 1. Happy New Month!  The S&P500 closed down -0.87% for February, placing it marginally up +0.5% YTD. The equal

80% of the world is in a Bull Market. Specifically, 80% of the 70 countries we track are up at least 20% off their 52-week low (with +20% being a common benchmark/trigger for “bull market“). This is a very positive sign. The below chart shows this peculiar breadth indicator over time (the red line), and what’s interesting is a few things… First, this indicator has rarely been above 50% over the past couple decades (yet, it was steadily north of 50% during the 2000’s global equity bull market). Second, when this indicator surges like this it is typically a very good sign — for instance, see: 2003, 2009, 2020 (the start of new global equity bull markets). Third, by contrast the time to be concerned is when this indicator peaks and rolls over (no signs of that at the moment). In essence, this

Learnings and conclusions from this week’s charts: 1. Bullish rotation remains in play. 2. Tech stocks still look troubled. 3. AI spillovers are helping (already bullish) commodities. 4. Newspaper stocks present a case-study in disruption. 5. Commodity stocks (as a group) look good. Overall, the US tech vs non-tech and US vs global bullish rotations remain in play, this is helping make the tech troubles less of an issue at the index level. There is a risk that gives way to broader downside if tech breaks down, so it’s worth keeping close tabs on tech (among other things…) $S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $E-mini S&P 500 - main 2603(ESmain)

With tech in trouble (+a number of macro risks lurking on the horizon), defensives are starting to look interesting… Defensives (i.e. an equal-weighted basket of: Utilities, Healthcare, Consumer Staples) are turning up vs the S&P500 $S&P 500(.SPX)$ —after going through what has been a major relative bear market. But in particular, the following conditions make for a contrarian bullish (relative) setup for Defensives: Defensives’ relative value indicator reached similar levels to that seen at the peak of the dot com bubble (Defensives are extreme cheap vs the index). Investor allocations to defensives are ticking up from record lows. The market cap weight of defensives reached an all-time low late last year. The relative price (black line i

Learnings and conclusions from this week’s charts: Tech stocks (particularly software) remain under pressure. Investor exposure to tech is at historically elevated levels. Surging tech capex is coming at the cost of buybacks. Private equity stocks are also coming under pressure. Defensive stocks meanwhile are looking up. Overall, it’s fair to say that we are at a challenging juncture in markets. Tech stocks are coming under pressure, and from a starting point of major overvaluation and historically high allocations. So it’s worth keeping a closer eye on risk management and potential upside in defensives, while staying pragmatic with the otherwise still bullish outlook for cyclicals/global/commodities… Going it alone? as outlined the other day, the US tech sector remains under pressure, and

Learnings and conclusions from this session: US tech stocks have peaked (+rolled over vs US non-tech, global tech). Sentiment is slumping from previously extreme bullish/complacent. Positioning has also peaked, early signs of rotation showing up. Valuations are ticking down from extreme expensive levels. Stretched valuations reflect strong earnings (but that’s also a risk). Overall, tech stocks have peaked for now. The problem is they’re coming from a starting point of overvalued and overhyped. The benign/bullish outcome would be a plateau in tech and bullish rotation (into traditional cyclicals, global), while the bearish outcome would be outright downside (and rotation into defensives). This report looks at the evidence so far and weighs the next steps… 1. Tech Top (Absolute Terms): 

There’s a change in the air. The gloomy macro clouds of the past few years are starting to lift. Once weak and lagging parts of macro and markets are starting to stir, and a major macro theme I’ve been tracking is showing increasing signs of finally kicking full-swing into gear — today’s chart lays it out simply. Basically what we’re looking at here is a procession of policy pivots from big easing in 2020/21, panic tightening in 2022/23, and then back to easing in 2024/25. The result? Major monetary tailwinds are kicking-in right now. And we are seeing this having a clear positive impact on some of the key areas of the global economy that have previously been in deep stagnation: manufacturing, global trade, commodities, heavy industry. Real world, real growth, traditional cyclical parts of

Learnings and conclusions from this week’s charts: Stocks closed up in January (equal-weight beat cap-weight). A positive January is a positive sign for the rest of the year. Seeing apparent rotation out of crypto into precious metals. Also seeing rotation from growth/tech to value/cyclicals. Signs are it’s a case of “bullish rotation” (broadening bull). Overall, we’ve managed to get off to a decent start to the year with the gains and bullish rotations of January. There are a few risk spots to keep tabs on (price action in crypto, tech/growth), but the relative strength in some of the more cyclical parts of the market raise the prospect of a bullish broadening… Happy New Month! the (market cap weighted) S&P 500 $S&P 500(.SPX)$ closed up +

Hi there, Here's the topics I covered in my latest Weekly Macro Themes report: 1. Treasuries: Cheap valuations, very low allocations, and consensus bearish sentiment/positioning make for a contrarian bullish setup, but the tactical elements are lacking right now (monitoring the situation). 2. Inflation Risk: The risk of a second wave of inflation is credible, and therefore higher-for-longer risk remains a threat for nominal bonds (but may help TIPS[breakevens]). 3. Stocks vs Bonds: The longer-term/strategic charts are pointing to downside risk for stocks vs bonds, but the tactical elements are opposite (bullish technicals, benign macro). 4. Oil & Energy Stocks: Remain vigilant to upside risk in the oil price, and in particular for energy stocks (which are under-allocated, undervalued,