Based on our current reads, this is our outlook on the major Asset Classes. Click on the colored signal strength indicators for breakdowns of the factors that make up the signals. Click an asset class icon for our in-depth analysis.
-------------- Select Stress Event --------------
2001 Dot-com Slowdown
2001 Enron Collapse
2001 Sept 11
2002 Accounting Scandals and WorldCom
2002 Equity Rally
2002 Equity Sell-Off
2004 Emerging Market Troubles
2006 Emerging Market Crash
2007 Burst of the Housing Bubble
2007-2008 Subprime Mortgage Meltdown
2008 Bear Stearns Collapse
2008 Fannie, Freddie Nationalization
2008 January (Peak of Crisis)
2010 Flash Crash
2011 Japanese Earthquake
2012 Greek Crisis over Austerity
2013 Equity melt up
2013 US Govt partial shutdown
2014 Commodity collapse of 2014
2015 Greece Austerity vote
2017 Bitcoin Becomes Mainstream
2017 IMF Growth Declaration
2017 US Tax Reform
2018 BoE Brexit Meeting
2018 FOMC Tightening Broadcast
2018 Trade Wars
2018 Xi Jinping Term Limit Removed
February 2018 VIX melt up
SP Worst Drawdown1 since 1999
SP Worst Drawdown2 since 1999
SP Worst Drawdown3 since 1999
SP Worst Drawdown4 since 1999
SP Worst Drawdown5 since 1999
Historically, US Equities have been the highest performing asset class, delivering almost 9.6% nominal and 6.5% real returns, which is why many of our reads are intently focused on Equities. Although we do not use our composite Fear Index to short Equities, a read above 1.5 is fairly anomalous and indicates a level of uncertainty incommensurate with a confident buy read on Equities.
Of all the Asset Classes, Bonds are the most difficult to short. So our reads are typically looking for reasons to NOT LIKE Fixed Income rather than needing reasons to LIKE them. In other words, we are pro-Fixed Income until we have a very compelling reason not to be. Today there is no reason not to like Fixed Income. In fact, with positive Fear, and positive Bond Yields, Fixed Income is very attractive at the moment.
From an econometric perspective, Commodities are primarily impacted by Growth (measured in the Short-Term), Fear and Inflation. Economic Growth requires raw materials, Fear causes market participants to flee from risky assets, and Commodities are an Inflation hedge. Our outlook on Commodities is fairly neutral today. Positive Short-Term Growth (Commodity buy signal) is being counteracted by positive Fear (Commodity sell signal). Inflation is currently negative (Commodity buy signal), but quantitative easing in the market negates this factor.
Copyright © 2019 Ramsey Quantitative Systems, Inc.