Equity Model = #N/A

Apparently, the flogging of the dollar will continue until morale improves. I said my peace on the topic last week, but that hasn’t prevented markets from upping the pressure on the greenback. The prospect of a government shutdown added to the pain last week—it is now a reality—but so far other markets haven’t taken note. Bond yields have been rising, although not faster than before the dollar was taken to the woodshed. And equities…well, it’s looking pretty good, isn’t? Global equities rallied incessantly last year, and they have come out swinging in 2018. The MSCI World is up a punchy 4.3% year-to-date, and we aren’t even through the first four weeks of trading. In case you’re wondering, this pace would deliver a cool 74.5% return for the year, if sustained. Even the most ardent equity bulls probably don’t believe that, but I am starting to wonder what exactly we’re supposed to expect. I have also reached the stage where I am struggling to make sense of my equity models. I concede that the technical picture is mixed. My normalised put/call ratio on the S&P 500 has collapsed, indicating that few investors are bothered to hedge. Breadth, however, remains resilient, hinting the big bear is still far away.

To you want to read the rest? Click here for the PDF.