AGA Chart Book – May 24, 2013

AGA Weekly Chartbook

1.    Global Financial Conditions

  • U.S. and European Financial Conditions deteriorated this week
  • Libor, Credit Spreads, and S&P 500 Implied Volatility remain below average
  • S&P 500 P/E multiple is currently 16.08, but is forecasted to contract to 13.45 in FY 2014
  • Consensus earnings growth and cash flow growth for the next 12 months is 10.2% and -5.4% respectively

2.    Global Equity Markets

  • Global Equities retreated this week as Bernanke hinted at an eventual reduction in monetary accommodation
  • In Japan, equity volatility is increasing along with interest rates as the central bank struggles to communicate further accommodation
  • Japanese equities lost 6% on Thursday and traded a wide 4% range on Friday
  • AGA Top Ranked Countries – MTD: #1 Japan: -2.52%, #2 Turkey: +2.65%, #3 Russia: +1.17%, #4 USA: +3.52%, #5 Thailand: -3.97%

3.    Interest Rates and Fixed Income

  • US 10yr yields have rallied from 1.62% to 2.01% over the last four weeks, key resistance @ 2.05% – 2.10%
  • Investment Grade Bonds have retreated with Treasuries this month; while spreads remain narrow (@1.61%)
  • High Yield Bonds (HYG) has struggled this month (making lower highs); while spreads narrowed this week (@3.16%)

4.    Major Currencies

  • The US Dollar consolidated this week, holding gains and remaining above a 4 year triangle pattern
  • The Australian Dollar has weakened sharply from 1.038USD/AUD to 0.965USD/AUD over the last 3 weeks
  • MXN/USD @ 12.53, weakening from 12.34 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 @ $1384/oz., up from $1359/oz. last week

6.    The Economy

  • Economic Data has been worse than expected over the last 12 weeks, but appears set to begin beating expectations
  • The divergence between economic data and 6 month S&P 500 returns has begun to narrow

7.    Investor Sentiment

  • The VIX Index @ 13.99, up from 12.45 last week
  • Financial Stress spiked to 6 week highs to finish the week
  • Macro Risk has steadily increased over the last 7 months
  • Bullish Individual Investors (AAII) outnumber Bearish Investors by a lofty 27%, near a 12 month high

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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