We’ve been highlighting the weakness in the ”metal with a PhD in economics” all year so it should come as no surprise that we’re keen watchers of copper prices.
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While (some) equity markets have gone a long way to erase the October decline or even eclipse the old highs, the number of stocks that are gapping lower on the open of trading is increasing. Why is measuring the number of gapping stocks important? It is a simple way of gauging investor emotional selling behavior.
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In our last quarterly investor presentation (see Dollar Dynamics) we highlighted how a strong US Dollar tends to lead to a narrowing market.
Read MoreDespite the rally we’ve seen over the past few weeks there are still a significant number of stocks in bear market territory, defined as down more than 20% off of their 200-day high.
Read MoreIf we had been on a deserted island in the south Pacific for the past month and a half with no cell service or internet access (doesn’t sound so bad!) and upon our return we knew only that that US stocks had dropped nearly 10% and then rallied back to make an all-time high, we
Read MoreConsumer discretionary stocks have been by far the best forming cyclical sector of the US stock market for five years now. In the charts below, we show the relative performance of North American consumer discretionary compared to the MSCI World index and the MSCI North America index.
Read MoreThe BOJ and Japanese government have since July been making it crystal clear in language as well as action that the preferred direction of the yen versus the major currencies is lower.
Read MoreWe focus a lot of our time on stock valuation because we believe that valuations are one of the best long-term indicators for future returns. When valuations are high, future returns tend to be lower and when valuations are low, future returns tend to be higher.
Read MoreAccording to our Gavekal Factor Scoring Model, the US dollar has been the most highly correlated factor (out of 30) with the MSCI World Index over the past year (which is why we have been focusing so much of our attention on it over the past few months).
Read MoreCircling back to a topic we have addressed previously (here and here), today’s plunge in the EUR/USD exchange rate puts it back on track towards syncing up with the interest rate differential between corresponding spreads: Having narrowed the gap that developed late last year, how much further might the euro fall?
Read MoreFollowing yesterday’s rather disappointing retail sales data release, Markit’s Retail PMI data (released today) were not very inspiring either: While Germany managed to register marginal growth, the rest of the region’s major economies remain below 50, indicating continued contraction: Employment fell for the first time since May: And prices paid remain subdued, reaching an average
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Given the non-correction-correction that took place in October it should be no surprise that valuations didn’t exactly correct either.
Read MoreSomewhat surprisingly, the percentage of stocks that outperform the MSCI World Index over a short-term horizon, say 200 days, stays in a fairly tight range of approximately 40-60% in general. Currently, only 45% of stocks in the MSCI World Index have managed to outperformed the MSCI World Index over the past 200 days.
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Despite the powerful rally over the last several weeks that brought the US equity markets back to their all-time highs, treasury yields are up only slightly and are well below mid-September levels.
Read MoreOur Gavekal Knowledge Leaders Developed World Index (KNLG, see here for more information) is an equal weighted index of the developed world’s most innovate companies.
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