AGA Chart Book – May 10, 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
  • Libor, Credit Spreads, and S&P 500 Implied Volatility are low
  • S&P 500 P/E multiple is currently 15.99
  • Consensus earnings growth for the forward 12 months (FY) is 10.6%
  • Weekly correlation between the S&P 500 and the Fed balance sheet is 0.89

2.    Global Equity Markets

  • Global Equities continue to rally despite worse than expected economic data
  • After a nice rally, Emerging Market Equities are struggling to break above technical resistance
  • The S&P 500 breadth is strong, suggesting that any near-term correction would be followed by new highs
  • Healthcare (+25.1%) leads Global Sectors YTD; Basic Materials lag all sectors (-0.11%) YTD
  • Asia Pacific (+25.4%) leads global regions YTD; Latin America lags all regions (+1.95%)
  • AGA Top Ranked Countries – MTD: #1 Japan: +0.51%, #2 Turkey: +3.44%, #3 Russia: +3.24%, #4 USA: +2.34%, #5 Thailand: -0.57%

3.    Interest Rates and Fixed Income

  • US 10yr yields may be reversing trend, bouncing from 1.62% to 1.90% over the last two weeks
  • Bill Gross says, “Bond bull market is over.”  Jeff Gundlach says, “The Fed’s not going to stop…It’s going to continue to trend in the same direction.”
  • Investment Grade Bonds retreated with Treasuries this week, while spreads narrowed sharply
  • High Yield Bonds rallied this week, and spreads remain narrow

4.    Major Currencies

  • The Mexican Peso (+9.2%) and Japanese Yen (-21.8%) are the strongest and weakest major currencies vs. USD over the last 6 months
  • The US Dollar rallied this week and appears to be breaking out of a 4 year triangle pattern
  • MXN/USD @ 12.08, weakening from 12.07 last week.  The Mexican Central Bank is forecasted to ease rates again in September.

5.    Commodities

  • Commodities (an equally weighted basket) remain in a medium-term downtrend
  • Gold @ $1448/oz., down from $1470/oz. last week
  • Oil @ $96.04/barrel, up from $95.46/barrel last week

6.    The Economy

  • Economic Data has been worse than expected over the last 12 weeks
  • There is divergence developing between the S&P 500 and the Economic Surprise Index
  • Housing and Labor have been the bright spots of the US Economic Recovery
  • The Industrial Sector and Business Cycle Indicators have disappointed
  • Household and Industrial data has worsened over the last 4 weeks
  • Next week’s calendar includes: Retail Sales, Industrial Production, CPI, Housing Starts, and Leading Indicators

7.    Investor Sentiment

  • The VIX Index @ 12.59, down from 12.85 last week
  • Financial Stress decreased over the last 4 weeks

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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