From the desk of Steve Strazza @Sstrazza
Our Top 10 report was just published. In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Stocks Or Bonds?
When the market provides us mixed signals, we dive beneath the surface to find more clues about the current environment. Here's the S&P 500 relative to U.S. Treasury Bonds, with the Russell 2000 overlaid. Note the similarity between them during the past year. When comparing stocks vs bonds it tells a story of not just where the alpha is but also how market participants are behaving. Similar to strength from small-caps, the ratio is a great gauge of risk appetite. Hence, why they look the same.
SPY/TLT tried to break out this week, but couldn’t quite get it done. As long as these charts continue to be trapped in their sideways ranges, expect more messy action for equities and risk assets in general. But, if and when we get upward resolutions, be ready for a more risk-on environment.
