AGA Chart Book – April 5, 2013

AGA Weekly Chartbook

1.    Global Financial Conditions
o    After making new all-time highs at the end of March, U.S. Equities dropped this week (S&P 500 -1.01%)
o    U.S. and European Financial Conditions continued to worsen this week, but remain at levels conducive to risk taking
o    Emerging Markets have underperformed Developed Markets YTD
o    Japan (23.5%), Switzerland (+12.0%), and U.S. (+8.9%) are leading developed markets YTD
o    Italy remains under pressure, down -6.3% YTD
o    Italian and Spanish 10yr Bond Yields are higher YTD
o    S&P 500 P/E multiple is forecasted to contract from 15.3 to 12.6 over the next 24 months
o    Consensus earnings growth for FY 2013 is forecasted at a lofty 12.8%

2.    Interest Rates and Fixed Income
o    TLT (20+ year Treasuries) broke out of a well-established 9 month downtrend this week
o    The US 10yr yields have made a significant move lower, currently @ 1.71%
o    Investment Grade Bonds broke out to new highs while spreads remain flat
o    High Yield Bonds are losing upward price momentum and showing a bearish divergence
o    5 Year Forward Inflation Expectations are at 2.70%, down 0.17% over the last few weeks

3.    Major Currencies
o    The Mexican Peso (+5.1%) is the strongest major currency vs. USD over the last 6 months
o    The Japanese Yen (-19.4%) is the weakest major currency vs. USD over the last 6 months
o    The South Korea Won is forecasted to be the strongest major currency vs. USD (+6.8%) through Q2 2013
o    The Swiss Franc is forecasted to be the weakest major currency vs. USD (-2.7%) through Q2 2013
o    The US Dollar has rallied nicely from support @ 79 but is struggling to make new 12 month highs
o    EURO @ $1.299, up on the week
o    MXN/USD @ 12.35, strengthening from 12.41 last week and making new 12 month lows
o    Mexican Peso strength is currently exhibiting a high correlation with S&P 500 strength

4.    Global Equity Markets
o    The ACWI and S&P 500 have broken out to 12 month highs, but remain below all-time highs
o    The MSCI EAFE and MSCI EM are remain below recent 12 month highs
o    Over the last 12 months (in USD): Turkey (+37%, 11 P/E) and Switzerland (+26%, 15 P/E) lead global markets
o    Healthcare (+18.6%) leads Global Sectors YTD; Basic Materials lag all sectors (-3.7%) YTD
o    Asia Pacific (+14.2%) leads global regions YTD; BRICs lag all regions (-1.2%)

5.    The Economy
o    Housing, Real Estate, and the Labor Market have been bright spots of the US Economy
o    The Industrial Sector appears to be weakening
o    Economic Data has been worse than expected over the last 6 weeks

6.    Commodities
o    Commodities (an equally weighted basket) remain in a medium-term downtrend
o    Gold @ $1581/oz., bounced from 10 month lows around $1550 to close the week
o    Oil @ $91.16/barrel, is testing its 10 month uptrend
o    Platinum @ $1537/oz., is cheaper than Gold
o    Average Gas Prices have stopped moving higher, currently at $3.62, down from $3.77 five weeks ago

7.    Investor Sentiment
o    The VIX Index @ 13.92, and has been moving higher since mid March
o    Financial Stress is elevated and approaching bearish levels
o    Fund flows are not overly bullish
o    Bullishness moderated this week, % Bullish currently outnumber % Bearish by 7.3%

Please feel free to forward any questions or suggestions.



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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