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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 were down -0.1% over the past week, with rates models gaining +0.1% WoW, FX models down -0.1% and equity models down -0.5% WoW.
- Momentum models are flat in aggregate over a three-month time frame, with equity models the best performing (+0.5%).
Market Implications
- Momentum models are very bearish NZD/USD.
- Our G10 FX team has gone long the pair, aligning with our view that it is time to temper USD bullishness.
Latest Signals
Equity momentum model signals are mostly unchanged over the past week. The signals for the S&P 500 remain very bullish, with the DAX and FTSE biases also unchanged (modestly bullish and modestly bearish, respectively). The bias in the Nikkei shifted from modestly bullish to very bullish (Chart 1).
Rates momentum model signals are very bearish global fixed income across the board. Signals in the US 5Y, 10Y, long bond, JGB and gilts all remain very bearish, while bunds shifted from modestly bearish to very bearish (Chart 1).
Turning to FX, momentum models are uniformly bullish the USD. USD/JPY and USD/CAD signals remain very bullish, as does the EUR/SEK bias. EUR/USD, AUD/USD and NZD/USD stay very bearish. GBP/USD shifted from modestly bearish to very bearish, as EUR/CHF flipped from very bearish to modestly bullish and the EUR/NOK bias flipped to very bearish after being modestly bullish last week (Chart 2).
Model Performance
- Momentum models were down -0.1% over the past week, with rates models gaining +0.1% WoW, FX models down -0.1% and equity models down -0.5% WoW.
*The basic strategy is to use returns (lookback windows) to give buy/sell signals. So, if the US stocks are up over the past three months, you buy, otherwise, you sell (note I use excess returns).
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)