• JGB Bond model signals flip buy while others remain net sell.
• All equity models now signal buy.
• Over the past three months, the best-performing bond model has been the twelve-month lookback for Gilts (3.4%), for equities the twelve-month lookback for the Nikkei has been the performer (7.8%).
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- JGB Bond model signals flip buy while others remain net sell.
- All equity models now signal buy.
- Over the past three months, the best-performing bond model has been the twelve-month lookback for Gilts (3.4%), for equities the twelve-month lookback for the Nikkei has been the performer (7.8%).
Central bank policy has dominated markets this week with four of the G10 central banks scheduled. Notably the Federal Reserve begun to taper asset purchases at a $15bn per month pace, while the Reserve Bank of Australia discontinued its 10bps target for the April 2024 bond. The US dollar and Treasuries advanced as markets weighed the risk of persistent inflation and slowing global growth with the Federal Reserve’s patience on rates. On this backdrop, we saw three bond signals flip from sell to buy as JGB flips net ‘buy’, and all equity markets signal ‘buy’.
Latest Signals
This week JGB flips net ‘buy’ as the one- and twelve-month lookback models flip from ‘sell’ to ‘buy’, and the one-month lookback model for Gilts flips ‘buy’ (Table 1). Other than JGB, bond signals are net ‘sell’ (Chart 1).
‘Buy’ signals across all equity models. The one-month lookback model for the Nikkei flips to ‘buy’ while all other bond models remain ‘buy’ (Table 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 twelve-month lookback for Gilts. It has delivered 3.4% 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 7.8% 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).