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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.
Summary
- Momentum models reversed last week’s losses, up +0.2% WoW. Equities fared best (+0.4% WoW), then rates (+0.2% WoW).
- Equity momentum models are the only positively performing model over a three-month timeframe (+4.8%). Rates (-0.3%) and FX models (-0.8%) have struggled.
Market Implications
- Momentum models are heavily bearish EUR/USD – we are short.
Latest Signals
Equity momentum models remain heavily bullish on the S&P 500, Nikkei, and DAX, while they are bearish on the FTSE-100 (Chart 1). John has turned bullish on companies that provide AI infrastructure; sector exposure can be gained through SOXQ and SOXX ETFs, too.
Rates momentum models remain bullish on Bunds and bearish on USTs and Gilts. We have recently turned short on the US 10Y (target: 4.40%) and 30Y (target: 4.65%) and are paying 2Y EUR IRS vs 2Y GBP IRS (target: 90bps). Meanwhile, our rates PCA model is flagging 16 trades, with a hit rate above 70%.
Turning to FX, momentum models have turned heavily bearish EUR/USD – we are short EUR/USD (target: 1.055; stop loss: 1.0950). They have also turned heavily bearish AUD/USD – we are long AUD/NZD (target: 1.0950; stop loss: 1.0650). Signals were otherwise unchanged.
Model Performance
Momentum models reversed last week’s losses, gaining +0.2% WoW as equities (+0.4% WoW) and rates (+0.2% WoW) outperformed. The former remains the only positive performer over the past three months (+4.8%).
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.