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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.
- Momentum models (-0.4% WoW) reversed last week’s gains, with rates (-0.8% WoW) FX momentum models (-0.2% WoW) registered smaller losses.
- Rates momentum models are the best-performing models over a three-month timeframe (+3.0%). FX (+0.7%) followed, while equity (-1.7%) struggled.
- Momentum models pared bund bearishness. Henry has recently concentrated his focus on the EUR front-end, seeing value paying April 2024-dated EUR OIS.
Equity momentum models have turned bullish on the Nikkei, while they remain bearish elsewhere (Chart 1). In the US, John still believes a major selloff is unlikely and sees value being long regional banks and homebuilders.
Turning to FX, momentum models have flipped bullish on GBP/USD and EUR/CHF – we closed our short GBP/USD position after the Bank of England meeting. Elsewhere, they turned less bearish on AUD/USD – Ben found reason to be long Antipodean currencies versus the European majors.
Momentum models (-0.4% WoW) reversed last week’s gains over the past week as rates (-0.8% WoW) and FX momentum models (-0.2% WoW) offset a positive equity contribution (+0.1% WoW). However, rates momentum models (+3.0%) remain the best performer over the past three months.
*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).