AGA Chart Book – June 21, 2013

AGA Weekly Chartbook 


1. Global Financial Conditions
  • Global Financial Conditions have deteriorated this week; Macro Risk and Market Stress are spiking
  • Correlations between Equities and Fixed Income are increasing as higher interest rates force a re-rating of earnings multiples
  • The S&P 500 has broken near-term support at the 50 day moving average and support @ 1600, currently @ 1592
  • With global economic growth still rather weak, investors have responded negatively to the idea of “tapering” QE
  • Chinese Flash PMI came in below expectations at 48.3, and SHIBOR overnight interbank lending rates remain elevated @ 8%
  • The VIX Index (implied S&P 500 volatility) increased to 18.8 from 17.2 last week
  • Emerging Market Currencies have weakened sharply, increasing selling pressure for EM Equities and EM Bonds
2. The Economy
  • The Bernanke-Hawk “Tapering” Watch – Base Case: No Tapering before mid-2014
  • 5 year forward inflation expectations have dropped substantially over the last two weeks, moving from 2.75% to 2.4%
  • US Consumer Prices, Personal Consumption Expenditures, and Personal Income Growth are all decelerating – YoY
  • The M2 Velocity of Money and US Loans-to-Deposits continue to slow
  • 30 year Mortgage Rates have spiked to 18 month highs @ 4.29%
  • Industrial Production, ISM Manufacturing, and Leading Economic Indicators are slowing
  • The Unemployment Rate and Loan Delinquencies remain moderate
  • Economic Data (primarily labor and industrial sectors) has been worse than expected over the last 12 weeks
3.    Interest Rates and Fixed Income
  • 10 year US Treasury Yields have increased from 1.62% to 2.53% since May 3rd, now above key resistance levels @ 2.20% and @ 2.40%
  • Investment Grade and High Yield Bonds sold off this week, down -3.9% and -2.9%, respectively
  • Investment Grade and High Yield credit spreads narrowed slightly this week, currently at 1.69% and 4.14%, respectively
4. Global Equity Markets
  • The medium-term uptrend in global equities is being tested
  • The uptrend in US equities remains intact, S&P 500 is off 6% from all-time highs, support at 1570 and 1540
  • S&P 500 P/E multiple is currently 15.6, but is forecasted to contract to 13.0 by Q4 2014
  • Consensus earnings growth and cash flow growth for the next 12 months are 10.6% and -4.5%, respectively
  • Emerging Markets continue to underperform Domestic Markets
5. Major Currencies
  • All major currencies are weaker relative to the USD over the last 6 months
  • After two weeks of weakness, the US Dollar Index rallied sharply this week
  • The Global Carry Trade, driven by borrowing in Yen and USD, remains under pressure as rate and currency volatility is increasing
  • MXN/USD @ 13.33, weakening sharply from 12.71 last week
  • USD/EUR @ 1.31, weakening from 1.335 last week
6. Commodities
  • Commodities (an equally weighted basket) remain in a cyclical downtrend
  • Gold @ $1294/oz., down from $1383/oz. last week; Gold has broken double bottom support @ $1321/oz.
  • After rallying to $97.85/barrel, Crude Oil sold off this week, closing @ $93.89/barrel

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.


  1. I sat with a boutique bank rep for a Russian bank from NYC to Moscow. She had business meetings in Moscow. She verified that Russia is cheap. She handles mostly big industrial investors. Sound familiar? G

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