• Bond signals are unchanged on the week.
• Three signals flip to ‘sell’ for the S&P500 and DAX.
• The best performing bond and equity models over the past three months have been the 12-month lookback for the US long bonds (3.4%) and the 12-month lookback model for the FTSE-100 (3.1%).
The Bank of Canada removed exceptional forward guidance, expecting interesting rate hikes imminently and opening the floor to balance sheet reduction. Meanwhile, the Federal Reserve confirmed a March end to its taper of asset purchases and aligned with expectations of a March hike. Markets now price in five hikes this year, versus four before the event. USD has strengthened on risk-off sentiment as Treasury yields rose further and US inflation expectations have reduced.
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.
- Bond signals are unchanged on the week.
- Three signals flip to ‘sell’ for the S&P500 and DAX.
- The best performing bond and equity models over the past three months have been the 12-month lookback for the US long bonds (3.4%) and the 12-month lookback model for the FTSE-100 (3.1%).
The Bank of Canada removed exceptional forward guidance, expecting interesting rate hikes imminently and opening the floor to balance sheet reduction. Meanwhile, the Federal Reserve confirmed a March end to its taper of asset purchases and aligned with expectations of a March hike. Markets now price in five hikes this year, versus four before the event. USD has strengthened on risk-off sentiment as Treasury yields rose further and US inflation expectations have reduced. On oil, Brent crude tested $90 as capacity constraints for OPEC, and growing risks over Russian supply continued to be supportive. On this backdrop, S&P500 and DAX lookback models see three new ‘sell’ signals while bond lookback models remain net ‘buy’.
Latest Signals
Lookback signals for our bond models remain unchanged (Chart 1 and Table 1) as net ‘sell’. The only ‘buy’ signal continues to be from the three-month lookback model for Bunds. There were three signal changes to our equity lookback models (Chart 1 and Table 1). Signals for the three-month lookback models for the S&P500 and DAX, and the one-month lookback model for the S&P500 flipped to ‘sell’. Equities are net ‘sell’.
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 12-month lookback for US long bonds. It has delivered 3.4% over the past three months and is currently signalling ‘sell’ (Table 1, Chart 2).
- Equities: The 12-month lookback model for FTSE-100 delivered 3.1% over the past three months. It currently signals ‘buy’ (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).