Archive | May, 2015

Dr. Copper Is Down, Not Out

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While it is too early to really get our hopes up, it is worth noting that Dr. Copper has clawed its way back above the long-term support that it violated earlier this year: And though its efforts to overcome the downtrend seem to have faltered a bit today, the metal with a Ph.D in economics […]

Monetary Movements & Economic Mirage

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While we entered 2015 with the Federal Reserve talking confidently about lift-off and how many rate increases there would be by the end of the year, the markets didn’t seem to buy it.  As weak economic data began to surface, the Fed seemed to quietly backtrack first on the date of lift-off and then on […]

Does the Pause in USD Strength Imply Stronger Equities?

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As the U.S. Dollar takes a breather from its surge upward since the middle of last year… And our diffusion index of purchasing power parities versus 18 other currencies hovers in neutral territory… While individual PPP trends shift ever so slightly… Europe Asia North America Correlation with the USD has been the single most important […]

Is Equity Volatility Set to Rise?

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Even casual observers of the forex markets will have noticed that it has been a bit of a wild ride over the last several months.  And, while currency volatility has spiked, equities have remained relatively placid.  If this chart showing the historic relationship between the VIX and forex volatility is any indication, the current calm […]

Long-End Of US Yield Curve Suggests A Stronger Yen

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The relationship between the Japanese Yen and the spread between the US 30-year treasury yield and US 10-year yield has had a very tight negative correlation (-0.85) over the past 10-years (since 1986 when the bond spread series begins the correlation is -0.61). Since the end of March, the 30/10 spread has widened by 18 […]

Could the Bond-Bund Spread Widen Even Further?

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We first discussed the historic extreme in the spread between German Bunds and U.S. Treasuries last April (here).  And that relationship has continued since, propelling the difference (in red, below) to levels well above those reached over the last two decades:                 (Germany in blue, U.S. in grey) […]

US Equity Leadership (Still) Hasn’t Changed

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We mentioned two weeks ago how equity performance has flip-flopped in the second quarter and how asset prices are most likely just in a counter-trend rally. Since then, others have picked up on this theme with a lot of folks calling for higher bond yields in particular (we aren’t so sure). If equity markets are in the process […]

Has Sales Growth Peaked for the Cycle?

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Sales growth estimates for companies around the world began sliding towards the middle of 2014 as the price of oil began its months-long setback. In the first chart below we show the average and median company’s next 12 month sales growth estimate for the MSCI World Index which shows that the level of expected sales […]