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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 (+0.6% WoW) were offset by FX and rates.
- Rates momentum models are the best-performing models over a three-month timeframe (+1.3%). FX (-0.7%) and equity (-0.6%) struggled.
Market Implications
- Momentum models remain bearish on Bunds, though Henry thinks the case to be bearish BTPs is even stronger. The model agrees with his call to be long gilts (vs OATs)
- In FX, models pared EUR/NOK bullishness. Ben and Richard are waiting to turn bullish on NOK (vs SEK).
Latest Signals
Equity momentum models pared S&P 500 bullishness, remaining more bullish on the Nikkei and DAX (Chart 1). They remain bearish on the FTSE-100. Meanwhile, John sees a continued case for a Russell 2000 turnaround.
Rates momentum models have remained bearish on US rates, JGBs, and bunds, and bullish on Gilts. Meanwhile, our other rates models are flagging 15 additional DM trades. And, on the discretionary front, yesterday saw Henry position for BTP/Bund re-widening out to 200bp while he continues to see value in UK rates, too vs French. Across the pond, Mustafa expects MBS to outperform Treasuries into year-end while he is positioned for a 1Y1Y versus 2Y3Y SOFR steepener.
Turning to FX, momentum models have pared EUR/CHF and EUR/NOK bullishness – Ben and Richard favour trading NOK against SEK. Elsewhere, signals remained bullish USD/JPY – we remain neutral USD/JPY – and marginally bullish across EUR/USD, GBP/USD, AUD/USD, NZD/USD, and USD/CAD.
Model Performance
Momentum models were flat on the week as positive equity model performance (+0.6% WoW) was offset by losses in FX and rates. However, over the past three months, rates momentum models (+1.3%) remain the only positive performer.
Ben Ford is Researcher at Macro Hive. Ben studied BSc Financial Mathematics at Cardiff University and MSc Finance at Cass Business School, his dissertations were on the tails of GARCH volatility models, and foreign exchange investment strategies during crises, respectively.