AGA Chart Book – May 3, 2013

AGA Weekly Chartbook

1.    Global Financial Conditions

  • U.S. and European Financial Conditions improved this week, and remain at levels conducive to risk taking
  • The ECB cut interest rates by 0.25% this week, and the Fed reiterated continued monetary accommodation
  • Libor, Credit Spreads, and S&P 500 Implied Volatility are low
  • S&P 500 P/E multiple is currently 15.8
  • Consensus earnings growth for the forward 12 months (FY) is 11%

2.    Interest Rates and Fixed Income

  • US 10yr yields may be reversing trend, bouncing from 1.62% to 1.74% at the end of the week
  • Investment Grade Bonds retreated this week, spreads remain narrow
  • High Yield Bonds rallied this week, spreads remain narrow

3.    Major Currencies

  • The Mexican Peso (+7.9%) and Japanese Yen (-18.8%) are the strongest and weakest major currencies vs. USD over the last 6 months
  • The US Dollar is consolidating into the tip of a 4 year triangle pattern, a break out is imminent
  • EURO @ $1.31, up from $1.30 last week
  • MXN/USD @ 12.07, strengthening from 12.17 last week

4.    Global Equity Markets

  • Global Equities continue to rally despite worse than expected economic data
  • Emerging Markets have rallied nicely over the last 3 weeks and appear to have broken a downtrend
  • The S&P 500 Advance Decline Line has confirmed new highs
  • Healthcare (+23.4%) leads Global Sectors YTD; Basic Materials lag all sectors (-3.9%) YTD
  • Asia Pacific (+21.3%) leads global regions YTD; Latin America lags all regions (+1.0%)
  • AGA Top Ranked Countries – MTD: #1 Japan: +0.64%, #2 Turkey: +2.76%, #3 Russia: +2.49%, #4 USA: +1.06%, #5 Thailand: -2.09%

5.    The Economy

  • U.S. Nonfarm Payrolls came in at +165K vs. estimates of +140K
  • There is a divergence developing between equity prices and economic data
  • Housing, Real Estate, Labor, and the Personal Sector have been the bright spots of the US Economic Recovery
  • The Industrial Sector and Business Cycle Indicators have disappointed and worsened over the last 2 weeks
  • Economic Data has been worse than expected over the last 10 weeks

6.    Commodities

  • Commodities (an equally weighted basket) remain in a medium-term downtrend
  • Gold @ $1470/oz., up from $1462/oz. last week
  • Oil @ $95.46/barrel, rallying from $93.00/barrel last week

7.    Investor Sentiment

  • The VIX Index @ 12.85, down from 13.61 last week
  • Financial Stress decreased over the last 3 weeks, but remains in a modest uptrend
  • AAII % Bearish outnumber % Bullish by 4.9%, down from 10.5% last week
  • The Citi Macro Risk Index is trending higher

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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