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Summary
- Momentum models were down 0.1% over the past week, with equity underperformance the big drag on the aggregate result. Equities were -0.6% WoW, FX was +0.1% WoW and fixed income was flat.
- FX momentum models are the best-performing over a three-month timeframe (+1.0%).
Market Implications
- Momentum models flipped from bullish EUR/USD to bearish – we think EUR/USD will be an attractive short near 1.0950.
Latest Signals
Equity momentum models are little changed over the past week, with the S&P 500, DAX and FTSE bias staying very bullish, while the Nikkei bias remains bullish albeit less so than previously. (Chart 1).
Rates momentum models are broadly unchanged, except for UK gilts, which flipped from very bullish to moderately bearish. We look at the political and market implications of the snap election call in the UK.
Turning to FX, momentum models’ views have shifted slightly – they have flipped from bullish to bearish in both EUR/USD and EUR/SEK and have become less bullish AUD/USD and more bullish USD/CAD. Ben still favours downside in AUD/NZD.
Model Performance
Momentum models were down 0.1% over the past week as equities (-0.6% WoW) underperformed bonds (0.0% WoW) and FX (+0.1% WoW). FX momentum models are the best-performing over the past three months (+1.0%), followed by equities (+0.8%) and rates (+0.3%).
(Charts 1 and 2: blue bar is last week’s signal; orange bar is this week’s signal.)
(Charts 3 to 5: orange bars are average returns of CTA model over past three months by asset, black dot is change over the past week).
*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).