From the desk of Steve Strazza @sstrazza
Welcome to our latest RPP Report, where we publish return tables for a variety of different asset classes and categories along with commentary on each.
Looking at the past helps put the future into context. In this post, we review the absolute and relative trends at play and preview some of the things we’re watching to profit in the weeks and months ahead.
You can consider this our weekly state of the union address as we break down and reiterate both our tactical and structural outlook on various asset classes as well as discuss the most important themes and developments taking place in markets all around the world.
While the weight of the evidence remains in the bull’s favor, we continue to see more data arrive that suggests the environment could be shifting toward one that is less conducive to risk assets, at least over shorter timeframes.
In fact, we’d argue that bears have more talking points today than they’ve had at any time over the trailing year. With each passing week, data continues to suggest a more cautionary approach is appropriate.
Shorter-term, the market looks increasingly messy. Defensive assets have stabilized at logical levels of support and are beginning to outperform. Meanwhile, a growing number of stock market indexes and other risk assets are achieving our upside objectives and/or running into critical areas of overhead supply.
Additionally, we’re seeing a growing list of red flags in our intermarket and cross-asset ratios, many of which are diverging from the broader averages.
As far as breadth and internals are concerned, the data remains bifurcated. Growth areas that have been under pressure are showing cracks beneath the surface. At the same time, value and cyclical areas of the market just printed fresh bullish initiation readings last week.