AGA Chart Book – March 15, 2013


AGA Weekly Chartbook

1.    Global Financial Conditions

  • U.S. Equities rallied this week (S&P 500 +0.61%)
  • S&P 500 Advance Decline Line has made new highs suggesting positive market breadth and participation
  • The internals of the current S&P 500 rally are better than at the tops in 2000 and 2007
  • U.S. and European Financial Conditions remain conducive to risk taking
  • Emerging Markets have underperformed Developed Markets YTD
  • Japan (8.7%), Spain (+4.7%), and Germany (+3.9%) are leading developed markets MTD
  • Italy remains under pressure and down YTD
  • Fixed Income is flat to down over the last 6 months
  • S&P 500 P/E multiple is forecasted to contract from 15.32 to 12.57 over the next 24 months
  • Consensus earnings growth for FY 2013 is a lofty 10.4%

2.    Interest Rates and Fixed Income

  • The US 10yr yields dropped this week, slipping 5bps on the week, currently @ 1.99%
  • High Yield Bonds rallied this week, but appear to be losing upward price momentum
  • 5 Year Forward Inflation Expectations are at 2.82%, flat on the week

3.    Major Currencies

  • The Swedish Krona (+2.53%) is the strongest major currencies vs. USD over the last 6 months
  • The Japanese Yen (-17.73%) is the weakest major currencies vs. USD over the last 6 months
  • The South African Rand is forecasted to be the strongest major currencies vs. USD (+4.35%) through Q2 2013
  • The Mexican Peso is forecasted to be the weakest major currencies vs. USD (-1.21%) through Q2 2013
  • The US Dollar has bounced nicely from support @ 79 and consolidated this week, currently @ 82.14 on the Dollar Index
  • EURO @ $1.3076, down from 1.36 six weeks ago and consolidating over the last two weeks
  • The Mexican Central Bank cut interest rates by 0.50% last week (first cut since 2009)
  • The Mexican Government proposed anti-trust economic reforms on Monday
  • MXN/USD @ 12.43, strengthening from 12.67 last week and making new 12 month lows
  • Mexican Peso strength is currently exhibiting a high correlation with S&P 500 strength

4.    Global Equity Markets

  • The ACWI and S&P 500 have broken out to 12 month highs, but remain below all-time highs
  • The MSCI EAFE and MSCI EM remain below recent 12 month highs
  • Over the last 12 months (in USD): Turkey (+37%) and Australia (+26%) lead global markets
  • Healthcare (+15.9%) leads Global Sectors YTD; Basic Materials lag all sectors (+0.98%) YTD
  • Asia Pacific (+13.3%) leads global regions YTD; BRICs lag all regions (+2.1%) YTD

5.    The Economy

  • Housing, Real Estate, and the Labor Market have been bright spots of the US Economy
  • Business Cycle Indicators are improving
  • Economic Data has surprised to the upside over the last 4 weeks
  • Next week’s economic calendar includes a FOMC decision and press conference, housing data, and leading indicators

6.    Commodities

  • Commodities (an equally weighted basket) remain in a medium-term downtrend
  • Gold @ $1591/oz., up from $1578/oz. last week with support at $1550/oz.
  • Oil @ $93.50/barrel, up from $91.95 last week
  • Average Gas Prices have stopped moving higher, currently at $3.69, down from $3.77 two weeks ago

7.    Investor Sentiment

  • The VIX Index @ 11.30, down from 15.36 two weeks ago
  • Financial Stress remains low, and has dropped over the last 4 weeks
  • AAII % Bullish spiked, and  now outnumbers % Bearish by 13.4%
  • State Street Investor Confidence has broken out to 12 month highs

 

Please feel free to forward any questions or suggestions.

Thanks,

James

disclosure: The opinions expressed in this Weekly Chart Book report are those of the author. The materials and commentary are strictly informational and should be used for research use only. This bulletin is not intended to provide investing or other advice or guidance with respect to the matters addressed in the bulletin. All relevant facts, including individual circumstances, need to be considered by the reader to arrive at investment conclusions that comply with matters addressed in this bulletin. Charts and information used in this report are sourced from Bloomberg.

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