Based on our current reads, this is our outlook on the major Asset Classes. Click on the colored signal strength indicators for breakdowns of the factors that make up the signals. Click an asset class icon for our in-depth analysis.
-------------- Select Stress Event --------------
2001 Dot-com Slowdown
2001 Enron Collapse
2002 Accounting Scandals and WorldCom
2002 Equity Rally
2002 Equity Sell-Off
2004 Emerging Market Troubles
2006 Emerging Market Crash
2007 Burst of the Housing Bubble
2007-2008 Subprime Mortgage Meltdown
2008 Bear Stearns Collapse
2008 Fannie, Freddie Nationalization
2008 January (Peak of Crisis)
2010 Flash Crash
2011 Japanese Earthquake
2012 Greek Crisis over Austerity
2013 Equity melt up
2013 US Govt partial shutdown
2014 Commodity collapse of 2014
2015 Greece Austerity vote
2017 Bitcoin Becomes Mainstream
2017 IMF Growth Declaration
2017 US Tax Reform
2018 BoE Brexit Meeting
2018 FOMC Tightening Broadcast
2018 Trade Wars
2018 Xi Jinping Term Limit Removed
2019 FED Announcement leads to Gold Rally
2020 Covid 19 Market Crash
February 2018 VIX melt up
S&P 1st Worst Drawdown since 1999
S&P 2nd Worst Drawdown since 1999
S&P 3rd Worst Drawdown since 1999
S&P 4th Worst Drawdown since 1999
S&P 5th Worst Drawdown since 1999
Historically, US Equities have been the highest performing asset class, delivering almost 9.6% nominal and 6.5% real returns, which is why many of our reads are intently focused on Equities. All of our Econometric reads are currently forecasting positive Equity performance. We are seeing positive Growth across all timeframes, as well as Equity-favoring Yield Spreads. All signs point to a bullish Equity market.
Of all the Asset Classes, Bonds are the most difficult to short. So our reads are typically looking for reasons to NOT LIKE Fixed Income rather than needing reasons to LIKE them. In other words, we are pro-Fixed Income until we have a very compelling reason not to be. Our Fixed Income-related reads are conflicted today. The buy signal of positive Bond yields is being counteracted by positive risk appetite, which is a sell signal for Bonds.
From an econometric perspective, Commodities are primarily impacted by Growth (measured in the Short-Term), Fear and Inflation. Economic Growth requires raw materials, Fear causes market participants to flee from risky assets, and Commodities are an Inflation hedge. Commodities look fairly attractive today as a result of negative Fear and positive Short-Term Growth. Our Composite Inflation Index is negative, which would normally result in a sell signal for Commodities, but the apparent quantitative easing present in the market mutes this signal. Our Gold-specific read on Inflation is also positive, making us long gold at the moment.
Copyright © 2019 Ramsey Quantitative Systems, Inc.