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When evaluating the performance of our momentum models we are considering the average performance across the one-, three-, and 12-month momentum models.
- Momentum models were flat over the past week as gains in equity momentum models (+0.2% WoW) were offset by rates.
- Rates momentum models are the best-performing models over a three-month timeframe (+1.4%). FX (-1.0%) and equity (-0.2%) struggled.
- Momentum models flip bullish on bunds but are yet to do the same for US rates. However, the levels to flip are close.
- In FX, momentum models added to EUR/USD and GBP/USD bullishness. Ben and Richard think the latter will outpace the former.
Equity momentum signals returned heavily bullish on the S&P 500, while they remained heavily bullish on the Nikkei and DAX (Chart 1). However, the recent risk rally has failed to spark the FTSE-100 higher; momentum models remain bearish on UK equities. On the strategic front, John has turned long Nvidia while he continues to see case for a Russell 2000 turnaround.
Rates momentum models have turned bullish on bunds but are yet to flip net-bullish on US rates! That means the recent bullish drive in US rates could have further to go with CTAs likely only lightly involved. Our signals suggest further buy signals are close (US 5Y (FV1) at 107.1; US 10Y (TY1) at 110.8; US long bond (US1) at 120.4). Our other rates models are flagging USD swaps 2s5s flattening and 14 other DM rates trades. We currently hold 11 global rates trades on a discretionary front.
Turning to FX, momentum models have turned heavily bullish on EUR/USD and GBP/USD, though Ben and Richard believe GBP/USD will outpace EUR/USD in the near-term, taking EUR/GBP toward 0.86. Elsewhere, they pared USD/JPY bullishness – Ben and Richard remain neutral but think the pair can likely settle at 145-146.
Momentum models were flat on the week as positive equity model performance (+0.2% WoW) was offset by losses in rates. However, over the past three months, rates momentum models (+1.4%) remain the only positive performer.
*The basic strategy is to use returns (lookback windows) to give buy/sell signals. So, if the US stocks are up over the past 3 months, you buy, otherwise, you sell (note I use excess returns).
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)