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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 -0.5% over the past week, with equity models down -1.5% WoW, FX models down -0.1% WoW and rates models down -0.3% WoW.
- Momentum models are down in aggregate over a three-month time frame, with rates and FX models the best performing (both -1.2%).
Market Implications
- Momentum models remain modestly bullish both AUD/USD and NZD/USD.
- We are short AUD/NZD.
Latest Signals
Equity momentum model signals have shifted slightly over the past week. The signals for the S&P 500 and DAX are unchanged (very bullish), while the bias in the Nikkei shifted from very bullish to modestly bullish and the FTSE bias has flipped from very bullish to modestly bearish (Chart 1).
Rates momentum model signals have seen material shifts. Signals in the US 5Y have shifted from modestly bearish to very bearish, while the biases in the 10Y and the US long bond have flipped from modesty bullish to very bearish.
The JGB signal is unchanged at modestly bullish, while the Bund signal has flipped from modestly bullish to modestly bearish and gilts have shifted from modestly bearish to very bearish (Chart 1). Viresh expects the BoJ to hike twice more this cycle, leaving the terminal rate at 0.75%.
Turning to FX, momentum model biases shifted slightly. USD/JPY and USD/CAD signals have both shifted from moderately bullish to very bullish, while EUR/USD went from modestly bearish to very bearish. The EUR/CHF bias has flipped from modestly bullish to very bearish, while EUR/NOK has flipped from modestly bearish to modestly bullish. GBP/USD, AUD/USD and NZD/USD signals are all unchanged at modestly bullish, as is EUR/SEK, which remains modestly bearish (Chart 2).
Model Performance
- Momentum models were down -0.5% over the past week, with equity models down -1.5% WoW, FX models down -0.1% WoW and rates models down -0.3% 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.)