Leading Indicator
November 16, 2021
The Hang Seng Index (HSI) has spent the last two months building a base and now reversing from short-term oversold levels. The Hang Seng tends to lead mainland China markets by several days/weeks. A resumption in growth from China is important to cyclical/value equity theme and view early strength in the HSI as a leading indicator. The 5/30-year Treasury yield spread (yield curve proxy) is our other leading indicator, which has recently widened back to ~75bps from ~65bps last week. We paused our preference for cyclical/value sectors two weeks ago on the break below 75bps, and need sustained levels beyond 75bps before signaling the all clear.
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