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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 flat over the past week, with equity underperformance the big drag on the aggregate result. Stocks were -1.2% WoW, FX was +0.1% WoW and fixed income was +0.5% WoW.
- FX momentum models are the best-performing over a three-month timeframe (+1.3%).
Market Implications
- Momentum models remain max bullish EUR/CHF – we see value in fading EUR/CHF strength, as several indicators point to the pair topping out.
Latest Signals
Equity momentum model signals are unchanged 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 the other equity index futures (Chart 1).
Rates momentum models have tacked more bearishly across most instruments, with all rates futures contracts being max bearish. Dominique analyses the Fed’s recent messaging, concluding the FOMC has turned hawkish.
Turning to FX, momentum models’ views have shifted slightly – becoming less bearish in GBP/USD and USD/CAD, flipping from moderately bullish NZD/USD to moderately bearish, and becoming more bearish EUR/NOK. Ben still favours downside in AUD/NZD.
Model Performance
Momentum models were flat over the past week as equities (-1.2% WoW) underperformed bonds (+0.5% WoW) and FX (+0.1% WoW). FX momentum models are the best-performing over the past three months (+1.3%), followed by rates (+0.7%) and equities (-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).