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 flat over the past week as gains in equity momentum models (+0.2% WoW) were offset by rates.
- Rates momentum models are the best-performing models over a three-month timeframe (+1.4%). FX (-1.0%) and equity (-0.2%) struggled.
Market Implications
- Momentum models flip bullish on JGBs but are yet to do the same for US rates. However, the levels to flip are close.
- In FX, momentum models turned bearish on the euro – they flipped bearish on EUR/USD and heavily bearish on EUR/CHF.
Latest Signals
Equity momentum signals remained heavily bullish on the S&P 500, Nikkei and DAX but bearish on the FTSE-100 (Chart 1). On the strategic front, John has turned long Nvidia while he continues to see case for a Russell 2000 turnaround.
Rates momentum models are yet to turn bullish on US rates as the recent run higher found reason to pause into this week’s NFP and next week’s Fed. Dominique now expects the Fed to be on hold through 2024. They did, however, turn bullish on JGBs; Bilal reviewed the recent hawkish BoJ comments. Our other rates models are flagging GBP 2s5s flattening and 14 other trades.
Turning to FX, momentum models have flipped bearish on EUR/USD and heavily bearish on EUR/CHF (Chart 2). They also flipped bullish on USD/CAD.
Model Performance
Momentum models were flat on the week as positive equity model performance (+0.8% WoW) was offset by losses in FX. However, over the past three months, rates momentum models (+0.4%) remained the best performer.
*The basic strategy is to use returns (lookback windows) to give buy/sell signals. So, if the US stocks are up over the past 3 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.)