In the long-run, currency exchange rates are mostly influenced by an economy’s current account balance. The ‘current account’ is simply the trade balance plus net income and direct payments. The currencies of countries with a current account surplus are supposed to trade at a premium
Last week, we explained the importance of cyclical sector leadership for the health of any bull market. We noted that gains last week came on defensive sector leadership, which casts doubt on the sustainability of new highs. We wouldn’t add broad equity exposure until cyclical
We think cyclical sector outperformance is still required for the S&P 500 to sustain current levels. Defensive sectors lead today, but we see enough encouragement in other markets to stay constructive in the near-term.
The S&P 500 continues to trade near record highs on defensive sector leadership. Record highs in the broad market are probably unsustainable if they’re not confirmed by record highs in cyclical indices. The recovery from the 1/31 coronavirus-linked low has included several days of cyclical
Markets are not dismissing the economic fallout from the outbreak, but they are ‘looking through’ it. Consensus expectations for China Q1 GDP are for ~4% growth (down from ~6%), which probably needs to go lower…maybe much lower. Earlier this week, we estimated Q1 growth would
The bullish narrative includes a number of strong tailwinds including: 1) reduced trade tensions; 2) ample monetary accommodation with major central banks sounding committed to low rates; 3) potential US earnings inflection based on Q4 results and; 4) signs of stabilizing global growth.
Today is the first day the S&P 500 has been led by cyclically-sensitive sectors since the coronavirus-led pullback occurred on 1/24. Over the past few days, we stressed the unsustainability of new highs in the SPX based on defensive sector leadership. The last time this
Last week, we explained the importance of cyclical sector leadership for the health of any bull market. We noted that gains last week came on defensive sector leadership, which casts doubt on the sustainability of new highs. We wouldn’t add broad equity exposure until cyclical
Our note from January 17 (the S&P 500 made a record high later that day) and January 23 suggested the increased probability for a 2-4% pullback in the SPX based on decelerating price trends and elevated bullish sentiment. The SPX declined ~3.2% (fits neatly into
The S&P 500 made new highs last June and July on defensive sector leadership. At the time, we cautioned readers about the sustainability of new highs built on defensive sector leadership.
