• Bond model signals continue to signal ‘sell’ for third week running.
• Flips across equity models turn equities net-buy across markets.
• Over the past three months, the best-performing bond model has been the one-month lookback for Gilts (3.6%), for equities it has been the twelve-month lookback for the Nikkei (7.1%).
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- Bond model signals continue to signal ‘sell’ for third week running.
- Flips across equity models turn equities net-buy across markets.
- Over the past three months, the best-performing bond model has been the one-month lookback for Gilts (3.6%), for equities it has been the twelve-month lookback for the Nikkei (7.1%).
The US Q3 earnings season has kicked off with positive surprises, especially among financials. However, companies are reporting ongoing supply chain issues, which, along with higher energy prices, are keeping inflation expectations high. Employment continues to relent a completion of a move back to pre-COVID levels, adding another complexity to central bank policy normalisation considerations. On this backdrop, bonds signal ‘sell’, and equity markets signal net ‘buy’.
Latest Signals
No changes, bond models continue to signal ‘sell’ for the third week running (Table 1). This leaves bond markets net ‘sell’ (Chart 1).
Four changes in equity models. The S&P500 one-month, Nikkei three-month, DAX one- and three-month all flip from ‘sell’ to ‘buy’ (Table 1). All other signals remain, equities are net ‘buy’ across all markets (Chart 1).
Best Performing Models
Looking at the performance of the best models over the past three months, we find the following:
- Bonds: the best-performing bond model is the one-month lookback for Gilts. It has delivered 3.6% returns and is currently signalling a ‘sell’ signal (Table 1, Chart 2).
- Equities: the best-performing equity model has been the twelve-month lookback for the Nikkei. It has delivered 7.1% returns and is currently giving ‘buy’ signals (Table 1, Chart 3).
*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).