This article is only available to Macro Hive subscribers. Sign-up to receive world-class macro analysis with a daily curated newsletter, podcast, original content from award-winning researchers, cross market strategy, equity insights, trade ideas, crypto flow frameworks, academic paper summaries, explanation and analysis of market-moving events, community investor chat room, and more.
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 equity models down 0.4% WoW, FX models flat WoW, and rates models down 0.2% WoW.
- Momentum models are down in aggregate over a three-month timeframe, with all models down and rates the best performing (-1.1%).
Market Implications
- Momentum models have become very bullish both the S&P500 and EUR/USD, while still remaining slightly bearish USD/JPY.
- We think the Nikkei has limited downside, making it unlikely investor inflows will support JPY.
Latest Signals
Equity momentum model signals have shifted slightly. Last week, momentum models were modestly bullish the S&P 500 and are now very bullish. The FTSE exhibits the same pattern. The Dax has flipped from modesty bearish to very bullish, while the Nikkei signal remains modestly bearish (Chart 1).
Rates momentum model signals, by contrast, are little changed from last week. Momentum signals in the US 5Y, 10Y and long bond futures are unchanged (all modestly bullish). Outside US rates, the JGB signal has receded from very bullish to modestly bullish. Both gilt and bund signals remain very bullish, unchanged from last week. We think current ECB pricing for the September meeting is too dovish and like fading it.
Turning to FX, momentum model views have shifted more noticeably. While the USD/JPY and EUR/CHF signals are modestly bearish (unchanged from last week), and the EUR/USD and GBP/USD signals have increased from modestly to very bullish, the biggest changes are in AUD/USD and NZD/USD (both flipped from modestly bearish to very bullish) and in USD/CAD (which flipped from very bullish to modestly bearish. EUR/NOK has slipped from very bullish to modestly bullish, and EUR/SEK is unchanged at very bearish.
Model Performance
- Momentum models were down 0.1% over the past week, with equity models down 0.4% WoW, FX models flat WoW and rates models down 0.2% 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.)