This article is only available to Macro Hive subscribers. Sign-up to receive world-class macro analysis with a daily curated newsletter, podcast, original content from award-winning researchers, cross market strategy, equity insights, trade ideas, crypto flow frameworks, academic paper summaries, explanation and analysis of market-moving events, community investor chat room, and more.
When evaluating the performance of our momentum models we are considering the average performance across the one-, three-, and 12-month momentum models.
Summary
- Momentum models edged higher over the past week as gains in equity momentum models (+0.8% WoW) were hampered by FX.
- Equity momentum models are the best-performing models over a three-month timeframe (+1.2%). FX models struggled (-1.3%).
Market Implications
- Momentum models have flipped bullish on US rates following the dovish December Federal Reserve meeting.
- In FX, momentum models remain bearish NOK/SEK. We, however, are long NOK/SEK, targeting parity.
Latest Signals
Equity momentum models pared Nikkei bullishness – the index has edged lower through December (Chart 1). Otherwise, they have remained heavily bullish on the S&P 500 and DAX but bearish on the FTSE-100. On the strategic front, John remains bullish on the Russell 2000.
Rates momentum models turned bullish on US rates as the Federal Reserve proved more dovish than expected. Meanwhile, they turned heavily bullish on JGBs and Bunds – we see value in a 10Y BTP-Bund, and KfW widener – and remained bullish on Gilts – we are watching for opportunities to fade Fed dovishness vs BoE.
Turning to FX, momentum models have returned heavily bullish on EUR/USD and bearish on USD/JPY (Chart 2). Elsewhere, they remain bearish EUR/SEK and bullish EUR/NOK, which implies a bearish NOK/SEK signal. We, however, remain long NOK/SEK, targeting parity.
Model Performance
Momentum models were marginally up on the week as positive equity model performance (+0.6% WoW) was hampered by losses in FX. Equity momentum models (+1.2%) are the best performing models over the past three months, too.
Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.
Ben Ford is a Researcher at Macro Hive. Benjamin studied BSc Financial Mathematics at Cardiff University and MSc Finance at Cass Business School, his dissertations were on the tails of GARCH volatility models, and foreign exchange investment strategies during crises, respectively.