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Market/Model Commentary
Currently the active model portfolio as defined by our 5-factor model is:
ECAM 5-Factor Composite Model
"Slow and Steady wins the race"
The Hare and the Tortoise
Aesop (Greek slave & fable author 620 BC - 560 BC)
"Technical Analysis is a windsock, not a crystal ball"
Carl Swenlin (Technical Analyst)
"Investing is the intersection of economics and psychology"
Seth Klarman (Hedge fund Manager, Baupost Group)
"Everyone's got a plan ..... until they get punched in the face"
Mike Tyson (Former World Heavyweight Boxing Champion)
The Hare and the Tortoise
Aesop (Greek slave & fable author 620 BC - 560 BC)
"Technical Analysis is a windsock, not a crystal ball"
Carl Swenlin (Technical Analyst)
"Investing is the intersection of economics and psychology"
Seth Klarman (Hedge fund Manager, Baupost Group)
"Everyone's got a plan ..... until they get punched in the face"
Mike Tyson (Former World Heavyweight Boxing Champion)
Latest Updates
DOW JONES GLOBAL INDEX
(06 February 2025)
Global equities were higher this past week with a percentage return (as measured by the Dow Jones Global Index) of +0.06%. This week price closed above the 40 week moving average and above price support @ 623.
Technical Analysis Summary (Dow Jones Global Index)
Technical Analysis for W1DOW by TradingView
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Dow Jones Global Index Historical Monthly Returns
Global equities closed the month of January with a gain of +3.1%. We are now within February which has historically been a weak month within the seasonal cycle:
- -5.2% cumulative percentage return over the past 24 years.
- 52.0% win percentage.
- greatest gain +5.2% (2015)
- greatest loss -10.2% (2009)
Weekly Global Macro Review
U.S. Equities
Major US indexes declined during the week, although the S&P 500 Index held up best, falling just 0.24%. Stocks opened sharply lower to start the week in response to the prior Friday’s announcement from President Donald Trump stating that the U.S. would be implementing 25% tariffs on imports from Mexico and Canada, along with 10% levies on Chinese imports, as of February 1. However, by the end of the day Monday, Trump had agreed to postpone tariffs on Mexico and Canada for 30 days, which provided some relief and seemed to help stocks recover some of their early losses by the end of the week.
Major US indexes declined during the week, although the S&P 500 Index held up best, falling just 0.24%. Stocks opened sharply lower to start the week in response to the prior Friday’s announcement from President Donald Trump stating that the U.S. would be implementing 25% tariffs on imports from Mexico and Canada, along with 10% levies on Chinese imports, as of February 1. However, by the end of the day Monday, Trump had agreed to postpone tariffs on Mexico and Canada for 30 days, which provided some relief and seemed to help stocks recover some of their early losses by the end of the week.
S&P 500:
DJIA: NASDAQ 100: S&P 400 Mid-cap: Russell 2000 Small Cap: |
-0.2%
-0.5% +0.0% -1.0% -0.3% |
Meanwhile, earnings-related headlines seemed to be the other notable driver of sentiment as investors digested another busy week of releases. According to data from FactSet, 77% of S&P 500 Index companies that have reported fourth-quarter results through Friday have posted consensus-topping earnings, with an average growth rate of 16.4% (compared with estimates for 11.9% earnings growth). Of the companies that have reported thus far, 63% have also surpassed sales expectations.
The week’s economic data releases kicked off on Monday with the Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI), which indicated that factory activity in the U.S. expanded in January for the first time since 2022. However, on a call with reporters following the data release, ISM Manufacturing Business Survey Chair Timothy Fiore noted that potential tariffs represent a “huge threat” to a sustained recovery in the U.S. manufacturing sector.
Later in the week, the ISM reported that its Services PMI for January declined from December, although the reading remained in expansion territory at 52.8 (readings above 50 indicate expansion).
The highlight of the week’s economic calendar arguably came from Friday’s closely watched nonfarm payrolls report. The Labor Department reported that the U.S. economy added 143,000 jobs in January, down from an upwardly revised reading of 307,000 in December and below economists’ expectations for 170,000. The unemployment rate also declined unexpectedly, to 4.0% from 4.1% in the prior month.
In other labor market-related news, the Bureau of Labor Statistics reported on Tuesday that U.S. job openings fell to a three-month low of 7.6 million in December, which seemed to provide support for the narrative that the U.S. labor market is stable but gradually cooling. Likewise, Thursday’s initial jobless claims data indicated that new claims for unemployment increased by 11,000 to 219,000 in the week ended February 1, while continuing claims rose to 1.89 million from 1.85 million in the prior week. Both readings were slightly above consensus expectations.
US Bonds
The week’s softer-than-expected employment data seemed to help drive positive returns for U.S. Treasuries as yields across most maturities decreased from where they ended the prior week. (Bond prices and yields move in opposite directions). The market is also starting to price in the impact that tariffs could have on global growth and disinflationary pressures.
Issuance in the investment-grade corporate bond market was higher than expected during the week, and just under half of the deals were oversubscribed. The high yield market saw above-average volumes, and investors remained focused on new issuance, which continued at a steady pace despite some weakness amid the initial reaction to tariff headlines early in the week.
The week’s economic data releases kicked off on Monday with the Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI), which indicated that factory activity in the U.S. expanded in January for the first time since 2022. However, on a call with reporters following the data release, ISM Manufacturing Business Survey Chair Timothy Fiore noted that potential tariffs represent a “huge threat” to a sustained recovery in the U.S. manufacturing sector.
Later in the week, the ISM reported that its Services PMI for January declined from December, although the reading remained in expansion territory at 52.8 (readings above 50 indicate expansion).
The highlight of the week’s economic calendar arguably came from Friday’s closely watched nonfarm payrolls report. The Labor Department reported that the U.S. economy added 143,000 jobs in January, down from an upwardly revised reading of 307,000 in December and below economists’ expectations for 170,000. The unemployment rate also declined unexpectedly, to 4.0% from 4.1% in the prior month.
In other labor market-related news, the Bureau of Labor Statistics reported on Tuesday that U.S. job openings fell to a three-month low of 7.6 million in December, which seemed to provide support for the narrative that the U.S. labor market is stable but gradually cooling. Likewise, Thursday’s initial jobless claims data indicated that new claims for unemployment increased by 11,000 to 219,000 in the week ended February 1, while continuing claims rose to 1.89 million from 1.85 million in the prior week. Both readings were slightly above consensus expectations.
US Bonds
The week’s softer-than-expected employment data seemed to help drive positive returns for U.S. Treasuries as yields across most maturities decreased from where they ended the prior week. (Bond prices and yields move in opposite directions). The market is also starting to price in the impact that tariffs could have on global growth and disinflationary pressures.
Issuance in the investment-grade corporate bond market was higher than expected during the week, and just under half of the deals were oversubscribed. The high yield market saw above-average volumes, and investors remained focused on new issuance, which continued at a steady pace despite some weakness amid the initial reaction to tariff headlines early in the week.
Europe/UK Equities
In local currency terms, the pan-European STOXX Europe 600 Index ended +0.6% higher—just off a recent record level—defying concerns about U.S. trade policy and stalling economic growth. Major stock indexes rose. Italy’s FTSE MIB gained 1.60%, Germany’s DAX added 0.25%, and France’s CAC 40 Index tacked on 0.29%. The UK’s FTSE 100 Index increased 0.31%.
German DAX:
French CAC: Italian MIB: Spanish IBEX: U.K. FTSE 100: |
+0.3%
+0.3% +1.6% +2.6% +0.3% |
The Bank of England (BoE) cut its benchmark interest rate by a quarter point to 4.5%, saying it had made sufficient progress on subduing inflation and wage growth. The Monetary Policy Committee voted 7–2 in favor of the move, with two members backing a half-point reduction due to a sharper-than-expected economic slowdown. The BoE halved its forecast for UK economic growth this year to 0.75%. According to the BoE’s latest projections, inflation is set to stay above target until 2027—six months longer than previously forecast. Governor Andrew Bailey said that he expected the BoE to be able to lower borrowing costs further, adding that “we will have to judge meeting by meeting, how far and how fast.”
Annual consumer price growth in the Eurozone stayed above the European Central Bank’s (ECB) target for a third consecutive month in January, accelerating to 2.5% from 2.4% in December. Core inflation—which excludes food, energy, alcohol, and tobacco prices—held at 2.7%. Services price inflation, which policymakers monitor closely, came in at 3.9%. ECB President Christine Lagarde said the rise in the inflation rate was anticipated and largely reflected base effects from energy prices a year ago.
Factory orders in Germany jumped 6.9% in December, rebounding from a 5.4% drop the month before and exceeding consensus expectations for an increase of 2.0%. The breakdown of the data showed a sizable increase in other vehicle construction, capital goods, and consumer goods orders. Orders were still 3.0% lower, however, compared with the same month in 2023. Meanwhile, industrial production contracted 2.4% in December, hitting its lowest level since May 2020, when the first waves of the coronavirus pandemic hit the country. Automotive output fell 10%, while machine maintenance and assembly dropped 10.5%.
Annual consumer price growth in the Eurozone stayed above the European Central Bank’s (ECB) target for a third consecutive month in January, accelerating to 2.5% from 2.4% in December. Core inflation—which excludes food, energy, alcohol, and tobacco prices—held at 2.7%. Services price inflation, which policymakers monitor closely, came in at 3.9%. ECB President Christine Lagarde said the rise in the inflation rate was anticipated and largely reflected base effects from energy prices a year ago.
Factory orders in Germany jumped 6.9% in December, rebounding from a 5.4% drop the month before and exceeding consensus expectations for an increase of 2.0%. The breakdown of the data showed a sizable increase in other vehicle construction, capital goods, and consumer goods orders. Orders were still 3.0% lower, however, compared with the same month in 2023. Meanwhile, industrial production contracted 2.4% in December, hitting its lowest level since May 2020, when the first waves of the coronavirus pandemic hit the country. Automotive output fell 10%, while machine maintenance and assembly dropped 10.5%.
Japan
Japan’s stock markets lost ground over the week, with the Nikkei 225 Index falling -2.0% and the broader TOPIX Index down -1.8%.
The yield on the 10-year Japanese government bond rose to 1.28%, from the prior week’s 1.23%, on expectations of further interest rate increases by the BoJ this year. The central bank’s base case is that it will raise interest rates if the economy and prices (as well as wages) develop in line with its forecasts. The case for further rate hikes was supported by data showing a sharp rise in nominal wages in December and the second consecutive month of positive growth in real (inflation-adjusted) wages, although the surge was largely due to a significant increase in companies’ winter bonuses. Separate data showed that household spending rebounded by more than expected in December. The BoJ has repeatedly emphasized the need for real wages to rise so that private consumption can follow an uptrend.
The summary of opinions from the BoJ’s January meeting, where it raised interest rates for the third time within a year, showed that policy board members had discussed the divergence in the monetary policies of the BoJ and the U.S. Federal Reserve (Fed). With the monetary policies moving in opposite directions, large fluctuations in markets, particularly foreign exchange markets, have been a concern. It was noted that, with the Fed expected to temporarily pause its policy interest rate cuts, this has led to increased flexibility in the BoJ’s monetary policy.
China
Mainland Chinese stock markets rose in an abbreviated trading week as evidence of strong consumer spending over the Lunar New Year holiday offset President Trump’s decision to slap a 10% tariff on Chinese imports. The onshore benchmark CSI 300 Index advanced +2.0% and the Shanghai Composite Index added +1.6% from Wednesday to Friday. Stock markets in mainland China were closed from January 28 to February 4 for the nationwide holiday. In Hong Kong, the benchmark Hang Seng Index advanced +4.5%, its best weekly performance in four months, driven by gains in technology companies.
Travel and retail spending over the Lunar New Year holiday, a key consumption period for China, pointed to improved domestic demand. Box office receipts over the eight-day holiday jumped 18% to USD 1.3 billion over last year’s holiday, Bloomberg reported, citing data from ticketing site Maoyan. The number of domestic trips rose to a record 501 million during the holiday, up 5.9% from last year, while spending on domestic trips rose 7% to the equivalent of USD 94.4 billion, according to China’s Ministry of Culture and Tourism.
Despite the solid holiday sales data, other readings signaled weakness in the broader economy. The Caixin China General Services Purchasing Managers’ Index (PMI) slipped to 51 in January, down from 52.2 in December. Though the PMI reading surpassed the 50 level that separates growth from contraction, it revealed that the pace of expansion in business activity and new orders both slowed to their lowest rates in four months, according to an economist at Caixin. Earlier in the week, Caixin reported that its manufacturing PMI slowed to 50.1 in January, down from December’s 50.5 reading and missing economists’ forecasts. The readings from Caixin, a private survey, came a week after China’s official manufacturing PMI unexpectedly contracted in January.
Weekly Performance
WEEKLY SUMMARY
U.S. Indices
Dow -0.5% to 44,303. S&P 500 -0.2% to 6,026. Nasdaq -0.5% to 19,523. Russell 2000 -0.4% to 2,280. CBOE Volatility Index +0.7% to 16.54.
S&P 500 Sectors
Consumer Staples +1.6%. Utilities +0.2%. Financials +0.6%. Telecom -2.1%. Healthcare -0.3%. Industrials -0.8%. Information Technology +0.8%. Materials -0.6%. Energy +1%. Consumer Discretionary -3.6%. Real Estate +1.8%.
World Indices
London +0.3% to 8,701. France +0.3% to 7,973. Germany +0.3% to 21,787. Japan -1.9% to 38,819. China +1.6% to 3,304. Hong Kong +4.5% to 21,134. India +0.5% to 77,860.
Commodities and Bonds
Crude Oil WTI -2.1% to $71./bbl. Gold +1.9% to $2,887.6/oz. Natural Gas +8.7% to 3.309. Ten-Year Bond Yield -0.2 bps to 4.494.
Forex and Cryptos
EUR/USD -0.34%. USD/JPY -2.44%. GBP/USD +0.15%. Bitcoin -4.5%. Litecoin -13.1%. Ethereum -15.7%. XRP -17.9%.
U.S. Indices
Dow -0.5% to 44,303. S&P 500 -0.2% to 6,026. Nasdaq -0.5% to 19,523. Russell 2000 -0.4% to 2,280. CBOE Volatility Index +0.7% to 16.54.
S&P 500 Sectors
Consumer Staples +1.6%. Utilities +0.2%. Financials +0.6%. Telecom -2.1%. Healthcare -0.3%. Industrials -0.8%. Information Technology +0.8%. Materials -0.6%. Energy +1%. Consumer Discretionary -3.6%. Real Estate +1.8%.
World Indices
London +0.3% to 8,701. France +0.3% to 7,973. Germany +0.3% to 21,787. Japan -1.9% to 38,819. China +1.6% to 3,304. Hong Kong +4.5% to 21,134. India +0.5% to 77,860.
Commodities and Bonds
Crude Oil WTI -2.1% to $71./bbl. Gold +1.9% to $2,887.6/oz. Natural Gas +8.7% to 3.309. Ten-Year Bond Yield -0.2 bps to 4.494.
Forex and Cryptos
EUR/USD -0.34%. USD/JPY -2.44%. GBP/USD +0.15%. Bitcoin -4.5%. Litecoin -13.1%. Ethereum -15.7%. XRP -17.9%.
WEEKLY ASSET CLASS MONITOR
(week ending 06 February 2025)
(week ending 06 February 2025)
Asset Class
|
Region
|
ETF Ticker
|
Weekly
Return |
2025 Return
|
Equities
|
World
U.S. Europe Asia Pacific ex-Japan Emerging Market |
VT
VTI VGK AAXJ VWO |
+0.18%
-0.20% +0.37% +0.88% +1.08% |
+3.24%
+2.83% +6.74% +1.55% +1.91% |
Bonds
|
U.S. Bonds
International Bonds Global Bonds |
BND
BNDX BNDW |
+0.33%
+0.50% +0.46% |
+0.93%
+0.74% +0.85% |
Real Estate Equities
|
Global Real Estate Equities
|
REET
|
+0.90%
|
+2.38%
|
Precious Metals Equities
|
Global Gold Miners
Global Junior Gold Miners |
RING
GDXJ |
+5.43%
+5.31% |
+21.56%
+19.16% |
GLOBAL EQUITY MARKET MONITOR
The past 4 years have been very challenging for global equities. They had a wicked roller-coaster ride in 2020 on the back of the Covid pandemic where they peaked on 12 Feb 2020 and fell dramatically (-34%) into their 23 Mar lows. They then rebounded and regained their losses by year-end.
For most of 2021 they remained largely in a "holding pattern" digesting their gains but declined considerably throughout 2022 before bottoming in October. Strong returns have been seen since the Oct/22 bottom with global equities exceeding past all-time highs (previous highs for all regions shown as blue box)
For most of 2021 they remained largely in a "holding pattern" digesting their gains but declined considerably throughout 2022 before bottoming in October. Strong returns have been seen since the Oct/22 bottom with global equities exceeding past all-time highs (previous highs for all regions shown as blue box)
Asset Class Return Monitor
(for week ending 06 February 2025)
(for week ending 06 February 2025)
Equities Legend:
Bonds Legend:
Currencies Legend:
Commodities Legend:
- Vanguard Total World Stock ETF (VT): (Cyan)
- Vanguard Total U.S. Stock Market ETF (VTI): (Red)
- Vanguard FTSE Europe ETF (VGK): (Lime Green)
- Ishares MSCI Asia ex-Japan ETF (AAXJ): (Dark Blue)
- Vanguard FTSE Emerging Markets ETF (VWO): (Pink)
Bonds Legend:
- Vanguard Total U.S. Bond Market ETF (BND): (Black)
- Vanguard Total International ex-U.S. Bond ETF (BNDX): (Green)
Currencies Legend:
- U.S. Dollar Index (Cash Settlement EOD) ($USD): (Orange)
- Euro (Philadelphia Index) ($XEU): (Maroon)
Commodities Legend:
- PowerShares DB Commodity Index Tracking Fund (DBC): (Purple)
- SPDR Gold ETF (GLD): (Sky Blue)
Past Week Asset Class returns
- Over the past week global equities (as measured by the Vanguard Total World Stock ETF (shown in CYAN) gained +0.18%.
- Emerging markets were the top performing equity region this past week with US markets lagging.
- U.S. bonds (Black) and International bonds (Green) were higher on the week.
- Commodities were higher on the week with the U.S. Dollar index down -0.27%.
Year-to-Date (2025) Asset Class returns
- In 2025 global equities (as measured by the Vanguard Total World Stock ETF shown in CYAN) have gained +3.24%.
- European market equities are the top performing equity region year-to-date with Asia Pacific ex-Japan markets lagging.
- Bonds have had positive returns in 2025 with U.S. bonds (Black) out-performing International Bonds (Green).
- The US Dollar index has lost -0.34% year-to-date.
The stock market is driven by a combination of corporate profits, trends, economic data, fund flows, expectations, greed, fear, opinions, analysis, geopolitical events and human nature. These variables are often in conflict with one another (especially in the short run) and form a sine-wave cycle of investor psychology which begins with optimism, peaks with euphoria, bottoms with despair and returns to optimism.
It must be reemphasized a complete market cycles is composed of 2 distinct cycles/phases: a "bull 1/2 cycle" and a "bear 1/2 cycle".
The Math of Losses
- a 20% loss requires a 25% gain to return to breakeven
- a 30% loss requires a 43% gain to return to breakeven
- a 40% loss requires a 67% gain to return to breakeven
- a 50% loss requires a 100% gain to return to breakeven
- a 60% loss requires a 150% gain to return to breakeven
This is why it is so important to not let losses continue in the face of a bear market decline and why we advocate phased movements into cash as our 5-factor model reverts to Red. The below graphic represents how we move within equity markets through a complete sine-wave market cycle:
World Regional Equity Monitor
We use the following U.S. exchange traded funds to monitor equity performance for the various world regions:
- World Equities: Vanguard Total World ETF (Cyan)
- U.S. Equity: Vanguard Total Market ETF (Red)
- European Equity: Vanguard FTSE Europe ETF: (Lime Green)
- Japan Equity: iShares Japan ETF (Black)
- Asia ex-Japan Equity: iShares MSCI All-Country Asia ex-Japan ETF (Blue)
- Emerging Market Equity: Vanguard FTSE Emerging Market ETF (Pink)
1 Year Rolling Regional Equity Performance
- Over the past 12 month rolling period regional equity performance has been positive for monitored regions.
- The strongest equity regions over the past 12 month have been US markets with Japanese/European/Asia Pacific ex-Japan/Emerging market equities lagging.
- Overall world equity performance (as measured by the Vanguard Total World ETF) have returned +17.75% (including dividends) over the past 12 month rolling period.
3 Month Rolling Regional Equity Performance
- Over the past 3 month rolling period the strongest performing world equity region has been European markets with Asia Pacific -ex Japan markets the weakest.
- Mixed equity returns have been evident over the past quarter (3 months) in most monitored regions.
1 Month Rolling Regional Equity Performance
- Over the past 1 month rolling period the strongest performing world equity region has been European markets with Asia Pacific -ex Japan markets the weakest.
- Positive equity returns have been achieved over the past month for monitored regions.
Past Week Regional Equity Performance
- Over the past week the major global equities were higher with Emerging markets outperforming other regions.
Latest Global Equity "Big Picture"
World equity market returns are monitored via the following index and ETF equity charts:
- Dow Jones Global Market Index (cap-weighted)
- Value Line Geometric U.S. Index (equal-weighted)
- Global Dow Index (equal-weighted)
- MSCI ACWI ETF (cap-weighted)
Dow Jones Global Market Index
(market cap weighted index)
For the week the Dow Jones Global Index had a gain of +0.06%. Price closed above the 52 week moving average (green line) and above support @ 623-628.
Value Line Geometric Index and Global Dow Index
(equal weighted indexes)
The Value Line Geometric Index ($XVG) is the median price performance of 1700 U.S. companies equal weighted (as opposed to most indexes which are market cap weighted) into an index. The Global Dow index ($GDOW) is a measure of the top 150 international companies equal weighted within the index.
These indexes are important as they equal-weight the price performance of all the companies held within the respective index. This removes the distortions associated with a small group of highly valued companies (which may be performing well) masking the performance of struggling companies and represents a good overview of overall internal equity breadth/strength.
These indexes are important as they equal-weight the price performance of all the companies held within the respective index. This removes the distortions associated with a small group of highly valued companies (which may be performing well) masking the performance of struggling companies and represents a good overview of overall internal equity breadth/strength.
Value Line Geometric Index ($XVG) Weekly
Global Dow Index ($GDOW) Weekly
iShares MSCI ACWI ETF
(market cap weighted ETF)
The iShares MSCI ACWI (All Country World Index) ETF is used as a benchmark to compare the performance of the various broad-based equity funds available in the Emirates Group Provident Scheme (EGPS) A/B/C accounts. It serves as a benchmark to determine how equity markets are performing on a worldwide basis. This assists in determining 2 parameters; whether to be invested in equities and also which funds within the EGPS offer the best performance relative to the benchmark.
The ETF is composed of the following regional components/weightings:
The ETF is composed of the following regional components/weightings:
ACWI Monthly Chart
Global equity markets bottomed in Oct 2022 and have recently reached new all-time highs.
For the month of February ACWI has gained +0.12%. It closed the month of January above the 12 month simple moving average (blue moving average on the chart above) keeping the long term trend BULLISH until month end.
For the month of February ACWI has gained +0.12%. It closed the month of January above the 12 month simple moving average (blue moving average on the chart above) keeping the long term trend BULLISH until month end.
ACWI Weekly Chart
This past week ACWI gained +0.12%. Price closed above the 40 week simple moving average (shown in GREEN) and above support @ 115.88.
World Equity Market Regional Relative Rotation Graphs
Below is a graph of 24 major regional equity market ETF's + ACWI (our world equity benchmark) shown on a Relative Rotation chart measured weekly with a 10 week look-back period (which forms the "tail" of the ETF). This graph allows us to observe over time how various regional ETF's are moving relative to both each other and also relative to cash.
- Leading (Green): (Momentum Positive + Price Relative Strength Positive)
- Weakening (Yellow): (Momentum Negative + Price Relative Strength Positive)
- Lagging (Red): (Momentum Negative + Price Relative Strength Negative)
- Improving (Blue): (Momentum Positive + Price Relative Strength Negative)
Given the cyclical nature of momentum and price within equity markets, in general the RRG charts will cycle in a clockwise manner (though not necessarily will each pass through all 4 quadrants as it is possible to rotate through an adjacent quadrant only).
Weekly Regional (Country) Relative Rotation Graphs (long term)
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The RRG trend analysis status is currently NEUTRAL for world equities:
- ACWI Weekly Quadrant: "WEAKENING" Quadrant
- 24 Country Net Score: NEGATIVE
- ACWI price Relative Strength (horizontal axis): POSITIVE
- ACWI price Momentum (vertical axis): NEGATIVE
Coincident Equity Market Indicators
Crude Oil
Crude oil was lower over the past week and remains rangebound. The 3-month correlation between crude oil and global equities is neutral.
Gold
Gold was higher over the past week and closed above its recent trading range. The 3-month correlation between gold and global equities is positive.
Commodities
Commodities were higher over the past week and remain above their previous range. The 3-month correlation between commodities and global equities is neutral.
U.S. 30 Year Treasury Bond
U.S. 30 year bond prices were higher over the past week. The 3-month correlation between US government bonds and global equities is positive.
Current 5-Factor Model Indications
The combined 5-Factor quantitative model is currently YELLOW (neutral). This indicates an even level of risk at present. The 5-Factor model currently has the following sub-model readings:
Economic Model
The Economic model is currently GREEN. The 1-year rate-of-change in global economic data had moved towards contraction but has stabilized over the past several months. The model is composed of numerous inputs including data from the following sources:
Forward Forecast Data:
Forward Forecast Data:
- OECD Composite Leading Indicators (CLI)
- J.P. Morgan Global Purchasing Managers (PMI) Index
- World Bank Monthly Global Economic Report
OECD Composite Leading Indicators
(data as of 13 January 2025)
The OECD Composite Leading Indicator (CLI) is designed to predict business cycle changes 6-9 months in advance. It provides early signals of turning points in business cycles showing fluctuation of the economic activity around its long term potential level.
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Below is our latest heat-map of the Composite Leading Indicators for various monitored regions.
Ideally we want to see the majority of regions indicating a CLI > 100 as well as steady/improving trends month-over-month and year-over-year.
- Red/Green numbers indicates above/below average future projected economic growth.
- Red/Green boxes indicates CLI change month/month and year/year.
Ideally we want to see the majority of regions indicating a CLI > 100 as well as steady/improving trends month-over-month and year-over-year.
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J.P. Morgan Purchasing Managers Index (PMI)
(05 February 2025)
(05 February 2025)
The J.P. Morgan monthly PMI Report is based on the results of manufacturing and service sector surveys covering over 18,000 purchasing executives in over 40 countries. Together these countries account for an estimated 89% of global gross domestic product (GDP).
Questions are asked about real events and are not opinion based. Data are presented in the form of diffusion indices, where an index reading above 50.0 indicates an increase in the variable since the previous month and below 50.0 a decrease. As such, using the PMI data gives us a real-time look at global growth.
Questions are asked about real events and are not opinion based. Data are presented in the form of diffusion indices, where an index reading above 50.0 indicates an increase in the variable since the previous month and below 50.0 a decrease. As such, using the PMI data gives us a real-time look at global growth.
- readings > 50 indicate economic expansion
- readings < 50 indicate economic contraction.
Latest Key Findings:
- Global Composite Output Index decreased to 51.8 (52.6 the previous month) and remains in modest expansion. It remains below its long term average Global PMI measure of 53.2.
- Global Manufacturing increased to 50.1 (49.6 the previous month) and has returned to fractional expansion.
- Global Services decreased to 52.2 (53.8 the previous month) and remains in steady expansion.
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Global PMI Commentary
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Below is our PMI monitor for selected regions/countries.
- numerical values > 50 (GREEN) indicate economic expansion in progress.
- numerical values < 50 (RED) indicating economic contraction in progress.
- trend box GREEN indicates improvement over the past month with RED indicating a decline over the previous month.
The latest data points to steady global growth as we enter 2525. The Global Composite Index remains in modest expansion (reading above 50).
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World Bank Global Monthly Outlook
(January 2025)
(January 2025)
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U.S. Economic Growth & Inflation
Year-over-Year GDP growth
The GDP in the United States expanded 2.5% year-on-year in the fourth quarter of 2024 , slowing slightly form a 2.7% rise in the previous period, the advance estimate from the BEA showed. GDP Annual Growth Rate in the United States averaged 3.16 percent from 1948 until 2024, reaching an all time high of 13.40 percent in the fourth quarter of 1950 and a record low of -7.50 percent in the second quarter of 2020.
Quarter-over-Quarter GDP growth
The US economy expanded an annualized 2.3% in Q4 2024, the slowest growth in three quarters, down from 3.1% in Q3 and forecasts of 2.6%, according to the advance estimate from the BEA. Personal consumption remained the main driver of growth, increasing 4.2%, the most since Q1 2023 (vs 3.7% in Q3 2024). Spending rose faster for both goods (6.6% vs 5.6%) and services (3.1% vs 2.8%). On the other hand, fixed investment contracted for the first time since Q1 2023 (-0.6% vs 2.1%), due to equipment (7.8% vs 10.8%) and structures (-1.1% vs -5%). However, investment in intellectual property products continued to rise (2.6% vs 3.1%) and residential investment rebounded (5.3% vs -4.3%). Also, private inventories were a big drag, cutting 0.93 pp from the growth. Both exports (-0.8% vs 9.6%) and imports (-0.8% vs 10.7%) contracted, leaving the contribution from net trade little changed. Government expenditure rose at a slower pace (2.5% vs 5.1%). Considering full 2024, the economy advanced 2.8%.
Annualized Inflation
The annual inflation rate in the US rose for a 3rd consecutive month to 2.9% in December 2024 from 2.7% in November, in line with market expectations. This year-end rise is partly driven by low base effects from last year, particularly for energy. Energy costs declined much less (-0.5% vs -3.2% in November), mainly due to gasoline (-3.4% vs -8.1%), fuel oil (-13.1% vs -19.5%) and natural gas (4.9% vs 1.8%). Also, inflation accelerated for food (2.5% vs 2.4%) and transportation (7.3% vs 7.1%) and prices fell less for new vehicles (-0.4% vs -0.7%). On the other hand, inflation slowed for shelter (4.6%, the lowest since January 2022, vs 4.7%) and prices continued to decline for used cars and trucks (-3.3% vs -3.4%). On a monthly basis, the CPI rose by 0.4%, the most since March, and above forecasts of 0.3%. The index for energy rose 2.6%, accounting for over 40% of the monthly increase, mainly due to gasoline (4.4%). Also, food prices went up 0.3% and shelter also edged up 0.3%.
Eurozone Economic Growth & Inflation
Year-over-Year GDP growth
The Eurozone economy grew by 0.9% year-on-year in Q4 2024, matching the previous quarter’s pace but falling short of market expectations for a 1% expansion, a flash estimate showed. The bloc remains under pressure from a deepening industrial recession, high energy costs, and sluggish spending by both consumers and the government. A weakening labor market and the risk of a trade war with the US have further fueled concerns. Among the Eurozone's largest economies, Germany remained in recession, with GDP contracting by 0.2% year-on-year in Q4. Meanwhile, France and Italy posted modest growth of 0.7% and 0.5%, respectively, while Spain outpaced its peers with a strong 3.5% expansion.
Quarter-over-Quarter GDP growth
The Eurozone economy unexpectedly stalled in Q4 2024, marking its weakest performance of the year, following a 0.4% growth in Q3 and an anticipated 0.1% expansion, according to preliminary estimates. The two largest economies saw surprising contractions, with Germany’s GDP shrinking by 0.2% and France’s declining by 0.1%. Italy stagnated for a second consecutive quarter, while Ireland’s GDP fell by 1.3%, and Austria’s economy remained flat. On the other hand, robust growth was recorded in Spain (0.8%), Portugal (1.5%), and Lithuania (0.9%), with Belgium (0.2%) and Estonia (0.1%) also seeing positive growth. Year-on-year, the Euro Area GDP grew 0.9%, the same as in Q3 and slightly below forecasts of 1%. Considering full years, the economy expanded 0.7%, above 0.4% in 2023.
Annualized Inflation
The annual inflation rate in the Euro Area accelerated for a third straight month to 2.4% in December 2024, the highest rate since July, compared to 2.2% in November and in line with expectations, preliminary estimates showed. This year-end increase was largely expected due to base effects, as last year’s sharp declines in energy prices are no longer factored into annual rates. Prices of energy increased for the first time since July (0.1% vs -2% in November) and inflation accelerated for services (4% vs 3.9%). On the other hand, inflation steadied for food, alcohol and tobacco (2.7%) and eased for non-energy industrial goods (0.5% vs 0.6%). Considering the bloc's largest economies, inflation increased in Germany (2.8% vs 2.4%), France (1.8% vs 1.7%), and Spain (2.8% vs 2.4%) but slowed in Italy (1.4% vs 1.5%). Meanwhile, core inflation which excludes prices for energy, food, alcohol & tobacco steadied at 2.7%. The ECB expects inflation to move back to the 2% target by the year-end.
Japan Economic Growth & Inflation
Year-over-Year GDP growth
The Japanese economy grew by 1.2% on an annualized basis in Q3 2024, compared to a preliminary figure and market consensus of 0.9%. The latest figure was much softer than a 2.2% expansion in Q2, despite marking the second consecutive quarter of yearly expansion. Capital expenditure sharply moderated in the face of rising interest rates while government spending eased sharply. Meanwhile, private consumption grew solidly, reflecting the impact of wage hikes. At the same time, external demand remained a drag on the GDP, contributing negatively for the third successive quarter.
Quarter-over-Quarter GDP growth
Japan's GDP expanded by 0.3% qoq in Q3 2024, above flash data and market forecasts of 0.2%. The latest result followed a downwardly revised 0.5% increase in Q2, marking the second consecutive period of quarterly growth, with business investment declining less than initially anticipated (-0.1%, compared with a 0.2% fall in the preliminary reading and a 1.1% rise in Q2). Additionally, a drag from net trade was softer than earlier expected (-0.2ppts, compared with the initial consensus of a 0.4ppts reduction), as both exports (1.1% vs. 1.5% in Q2) and imports (1.8% vs 3.3% in Q2) increased further. Meanwhile, private consumption remained resilient amid rising wages (0.7%, compared with a flash estimate and consensus of 0.9%, following a 0.6% gain in Q2). However, government spending was muted (0.1%, much less than a 0.5% rise in the flash print and after a 1.0% gain in Q2).
Annualized Inflation
The annual inflation rate in Japan jumped to 3.6% in December 2024 from 2.9% in the prior month, marking the highest reading since January 2023. Food prices rose at the steepest pace in a year (6.4% vs 4.8% in November), with fresh vegetables and fresh food contributing the most to the upturn. Further, electricity prices (18.7% vs 9.9%) and gas cost (5.6% vs 3.5%) increased at the fastest rate in four months with the absence of energy subsidies since May. Additional upward pressure also came from housing (0.8% vs 0.9%), clothing (2.9% vs 2.6%), transport (1.1% vs 0.9%), furniture and household utensils (3.0% vs 3.7%), healthcare (1.7% vs 1.6%), recreation (4.0% vs 4.5%), and miscellaneous items (1.1% vs 1.1%). In contrast, prices continued to fall for communication (-2.1% vs -3.0%) and education (-1.0% vs -1.0%). The core inflation rate rose to a 16-month high of 3.0%, up from 2.7% in November and matching consensus. Monthly, the CPI increased by 0.6%, the highest figure in 14 months.
China Economic Growth & Inflation
Year-over-Year GDP growth
The Chinese economy expanded by 5.4% yoy in Q4 2024, accelerating from 4.6% in Q3 and surpassing market estimates of 5.0%. It was the strongest annual growth rate in 1-1/2 years, boosted by a series of stimulus measures launched since September to boost recovery and regain confidence. In December, industrial output growth quickened to an 8-month high, while retail sales emerged from a 3-month low. However, the jobless rate hit a 3-month top. On the trade front, exports logged a double-digit rise in December, marking the ninth straight monthly gain and reaching the largest amount in 3 years, as firms rushed to complete shipments ahead of potential tariff hikes under the US Trump administration. Imports saw an unexpected rise to notch their highest value in 27 months. For the full year, the GDP grew by 5.0%, aligning with Beijing's 2024 target of around 5% but falling short of a 5.2% rise in 2023. Last year, fixed investment rose by 3.2% yoy, faster than the 2023 pace of 3.0%.
Quarter-over-Quarter GDP growth
The Chinese GDP grew by a seasonally adjusted 1.6% in Q4 2024, accelerating from an upwardly revised 1.3% rise in Q3 and marking the strongest quarterly increase since Q1 2023. This also indicated the 10th consecutive quarter of advance, driven by a broad range of stimulus measures since September to revive stalled economic momentum and address persistent challenges, including rising deflation risks, persistently weak demand, the prolonged property sector downturn, and high local government debt levels. On the monetary front, the PBoC has maintained a supportive stance, reducing the RRR for commercial banks by 50bps each in September and February and cutting several key interest rates to boost liquidity and spur activity. Despite these measures, the Chinese statistics agency highlighted ongoing risks from a challenging external environment and subdued domestic demand. It emphasized the need for more proactive and effective macroeconomic policies to sustain recovery.
Annualized Inflation
China’s annual inflation rate edged down to 0.1% in December 2024 from 0.2% in the previous month, aligning with market estimates and marking the lowest print since March. The latest result underscored mounting deflation risks in the country, despite government stimulus measures and the central bank's supportive monetary policy stance. Food prices fell following rises in the prior four months (-0.5% vs 1.0% in November). Meantime, non-food prices rose by 0.2% after previously showing no change, helped by rises in cost of housing (0.1% vs -0.1%), healthcare (0.9% vs 1.1%), and education (0.9% vs 1.0%), as well as a slower fall in transport cost (-2.2% vs -3.6%). Core consumer prices, excluding food and energy, rose 0.4% yoy, the most in 5 months, after a 0.3% gain in November. Monthly, the CPI remained unchanged, in line with consensus. That followed a 0.6% fall in November, which was the steepest drop in 8 months. For the full year, consumer prices went up 0.2%, matching the 2023 pace.
Valuation Model
The Valuation model is currently RED. Equity valuations are currently at the upper region of "fair value" relative to underlying current global economic fundamentals.
Technical Model
The Technical model is currently GREEN. Global equity markets have been in a trending advance since Oct 2023 following their Jul-Oct/23 correction.
Sentiment Model
The Sentiment model is currently YELLOW. Overall sentiment has turned neutral (sentiment acts as an inverse shorter-term trading indicator).
Liquidity/Economic Stress Model
The Liquidity/Economic Stress model is currently YELLOW.
World Bond Asset Class Return Monitor
We use the following U.S. exchange traded funds to monitor bond performance for the various bond asset classes:
Total Market Bond Basket:
- U.S. Total Bond Market (BND): (Red)
- International (ex-U.S.) Total Bond Market (BNDX): (Blue)
- U.S. Gov't Treasury Bonds (GOVT): (Orange)
- Foreign Developed Market Gov't Treasury Bonds (BWX): (Pink)
- U.S. Corporate Bonds (LQD): (Maroon)
- International Corporate Bonds (PICB): (Black)
- U.S. High Yield Bonds (JNK): (Purple)
- International High Yield Bonds (IHY): (Green)
- U.S. Gov't Inflation Protected Bonds (TIP): (Lime Green)
- International Gov't Inflation-Protected Bonds (WIP): (Cyan)
1 Year Rolling Bond Performance
- Over the past 12 months rolling period the top performing bond asset class has been US High Yield Bonds with Int'l Gov't Inflation Protected Treasury Bonds the worst performing.
- The U.S. Total Bond Market (RED) and the International (ex-U.S.) Total Bond Market (BLUE) have delivered positive returns over the past year.
3 Month Rolling Bond Performance
- Over the past 3 month rolling period the top performing bond asset class has been US High Yield Bonds with Int'l Gov't Inflation Protected Treasury Bonds lagging.
- U.S. Total Bond Market (RED) and International (ex-U.S.) Total Bond Market (BLUE) have delivered positive returns over the past quarter (3 months).
1 Month Rolling Bond Performance
- Over the past 1 month rolling period the top performing bond asset class has been US Gov't Inflation Protected Treasury Bonds with US High Yield Bonds lagging.
- The U.S. Total Bond Market (RED) and the International (ex-U.S.) Total Bond Market (BLUE) have delivered positive returns over the past month.
Past Week Bond Asset Class Performance
- Over the past week Int'l Gov't Inflation Protected Treasury Bonds were the top performing bond class.
- The U.S. Total Bond Market (RED) and the International (ex-U.S.) Total Bond Market (BLUE) posted higher returns over the past week.
Commentary:
It has been shown in repeated studies over many years a balanced portfolio consisting of both equities and bonds (with percentage holdings in each adjusted according to personal risk tolerances) remains the best methodology in managing a long term retirement portfolio (due to the independent/low correlated function each takes when navigating though various market cycles and economic conditions).
It is best to think of bonds and equities as 2 independent brains each looking at the market from a different perspective:
As such, historically both serve a useful purpose in a balanced portfolio.
It is best to think of bonds and equities as 2 independent brains each looking at the market from a different perspective:
- Equities: Corporate profits focused.
- Bonds: Economic growth and Inflation focused.
As such, historically both serve a useful purpose in a balanced portfolio.
ETF Bond Proxy
Global aggregate bonds posted a gain of +0.46% over the past week. They had remained rangebound since Jul/2024 and closed the week above the 52 week moving average.
It is important to note since late 2021 global bonds have acted as a poor portfolio diversifier as they have largely been correlated with global equities. We are monitoring closely for the first indication of a decoupling.
It is important to note since late 2021 global bonds have acted as a poor portfolio diversifier as they have largely been correlated with global equities. We are monitoring closely for the first indication of a decoupling.
U.S. 10 year Treasury Yield
The most recent global bear market in bonds began in mid-2020 when the US Federal Reserve pushed interest rates to 0% to combat deflation. Below is charts for the various US Treasury yields from their peak (bond prices move inverse to yields so falling treasury yields are bullish for bond prices).
U.S. treasury yields rose in a parabolic manner into Oct, 2023 before their recent decline. This past week yields closed below resistance @ 4.67% and remain above the 52 week moving average.
German 10 year Bund Yield
German 10 year treasury yields bottomed in early 2020 during the depths of the European Covid shutdowns. They rebounded in a parabolic manner into Oct, 2023 before their recent decline. This past week yields closed above the 52 week moving average and below resistance @ 2.68%.
Japanese 10 year Treasury Yield
Japan has been fighting deflation for decades and only recent unprecedented monetary policy by the BOJ appears to be having some effect upon deflation (and yields).
After bottoming at near -0.28% in mid-2016, yields have risen and were able to finally break above 0.15% in early 2022. They are currently employing yield curve control (YCC) to keep rates pegged below 1.0% (increased from 0.5% in Jul/2023). This past week yields closed above support @ 1.075% and above the 52 week moving average.
After bottoming at near -0.28% in mid-2016, yields have risen and were able to finally break above 0.15% in early 2022. They are currently employing yield curve control (YCC) to keep rates pegged below 1.0% (increased from 0.5% in Jul/2023). This past week yields closed above support @ 1.075% and above the 52 week moving average.
Currencies
Below is the 12/3/1 month and weekly rolling returns for the 6 currencies that make up the U.S. Dollar index. The U.S. Dollar index is composed of a weighted geometric mean of the dollar's value relative to the 6 currencies in the following list:
In addition, we also include the following for comparison purposes:
- Euro (EUR), 57.6% weight.
- Japanese yen (JPY) 13.6% weight.
- U.K. Pound sterling (GBP), 11.9% weight.
- Canadian dollar (CAD), 9.1% weight.
- Swedish krona (SEK), 4.2% weight.
- Swiss franc (CHF) 3.6% weight.
In addition, we also include the following for comparison purposes:
- The Australian Dollar (not a part of the USD Index) as it is a popular commodity currency.
- Gold (priced in USD) as it typically acts more like a currency void of fiat printing.
1 Year Rolling Currency Performance
- Over the past 12 months rolling period the top performing major currency has been Gold with the Canadian Dollar the worst performing.
3 Month Rolling Currency Performance
- Over the past 3 month rolling period the top performing currency has been Gold with the Australian Dollar lagging.
1 Month Rolling Currency Performance
- Over the past 1 month rolling period the top performing currency has been Gold with the British Pound lagging.
Past Week Currency Performance
- Over the past week the top performing major currency was the Japanese Yen with the Euro lagging.
U.S. Dollar: (Bullish Bias)
Commentary:
The USD was down -0.27% over the past week. It had been rangebound and confined to an 8-point consolidation range since late 2022 before its recent breakout.
Support / Resistance Levels (based upon respective time period closing price):
Weekly: 107.91 / 110.45
Monthly: 106.49 / 112.08
Support / Resistance Levels (based upon respective time period closing price):
Weekly: 107.91 / 110.45
Monthly: 106.49 / 112.08
US Dollar Index Daily charts
The 2 year daily chart (above) shows the trading range the USD has been confined to since late 2022.
The 10 year daily chart (above) shows the strong price resistance zone at the top of the blue box between 106.10-106.72 (broken this week).
Over the past week the USD closed above its short term trend 50 and 200 day moving averages.
(Short Term Bullish)
(Short Term Bullish)
US Dollar Index Weekly charts
The weekly chart shows the recent trading range since late 2023. Price is currently above the top of the range.
Price closed the week above the intermediate term trend 20 and 65 week moving averages.
(Intermediate Term Bullish)
Price closed the week above the intermediate term trend 20 and 65 week moving averages.
(Intermediate Term Bullish)
A longer term 20 year look-back at the USD shows the 79.05-104.32 price (yellow) area has been a very significant bull/bear battle zone since 1987.
US Dollar Index Monthly chart
For the month of February the U.S. Dollar index has lost -0.27%. Price remains confined to the rising price channel from the 2011 lows and has broken out of a 16 month consolidation zone between 101.03-106.49.
Price closed January above the long term trend 10 month moving average keeping the long term bias to Bullish until months end.
(Long Term Bullish)
Price closed January above the long term trend 10 month moving average keeping the long term bias to Bullish until months end.
(Long Term Bullish)
Euro (Bearish Bias)
The Euro was down -0.38% over the past week. It has remained largely range bound between 105-112 over the past year before its most recent breakdown.
Support / Resistance Levels (based upon respective time period closing price):
Weekly: 96.92 / 104.52
Monthly: 98.02 / 105.70
Support / Resistance Levels (based upon respective time period closing price):
Weekly: 96.92 / 104.52
Monthly: 98.02 / 105.70
Euro Daily Charts
The Euro topped out in early 2018 @ 125.10 and had been on a steady decline until March 2020. It rose dramatically into the end of 2020 had remained range bound in 2021 until its recent breakdown.
On the 2nd daily chart price it can be seen how important the yellow band daily resistance zone @ 114.61-116.04 is going back to 2015. Other areas of daily support/resistance are seen at 108.24-108.66 and 103.90-105.69.
The Euro closed the week below the short term trend 50 and 200 day moving averages.
(Short Term Bearish)
On the 2nd daily chart price it can be seen how important the yellow band daily resistance zone @ 114.61-116.04 is going back to 2015. Other areas of daily support/resistance are seen at 108.24-108.66 and 103.90-105.69.
The Euro closed the week below the short term trend 50 and 200 day moving averages.
(Short Term Bearish)
Euro Weekly Chart
The Euro peaked in 2008 and achieved a bottom in 2022. It has been on a steady decline but recently broke above important resistance @ 104.51-104.96 (which now should act as support).
This past week the Euro closed the week below the intermediate trend 20 week + 65 week moving averages.
(Intermediate Term Bearish)
This past week the Euro closed the week below the intermediate trend 20 week + 65 week moving averages.
(Intermediate Term Bearish)
Euro Monthly
For the month of February the Euro has lost -0.38%. On a monthly closing basis it closed the month of January below the long term trend 10 month moving average keeping the long term outlook bearish until months end.
(Long Term Bearish)
(Long Term Bearish)
UK Pound (Bearish Bias)
U.K. Pound Daily Charts
U.K. Pound Weekly Charts
U.K. Pound Monthly Charts
The British Pound was up +0.12% over the past week. It continues to recover from lows last seen 37 years ago. Historically since 1987 the Pound has traded within a range of 1.40 to 2.00 with brief excursions above/below this range. The previous all-time low over the past 200 years was 1.0520 (daily low @ 1.0438) seen in the 1st quarter of 1985 which was revisited in September 2022 (close 1.0696 27 Sep 2022).
This past week the Pound closed the week below its short term trend daily 50 +200 day moving averages and below the intermediate term trend 20 + 65 week moving averages. For the month of February it has gained +0.12% and closed the month of January below its long term 10 month moving average (which technically keeps the long term bearish until months end).
(Short Term Bearish)
(Intermediate Term Bearish)
(Long Term Bearish)
Support / Resistance Levels (based upon respective time period closing price):
Weekly: 121.54 / 127.34
Monthly: 121.33 / 133.09
This past week the Pound closed the week below its short term trend daily 50 +200 day moving averages and below the intermediate term trend 20 + 65 week moving averages. For the month of February it has gained +0.12% and closed the month of January below its long term 10 month moving average (which technically keeps the long term bearish until months end).
(Short Term Bearish)
(Intermediate Term Bearish)
(Long Term Bearish)
Support / Resistance Levels (based upon respective time period closing price):
Weekly: 121.54 / 127.34
Monthly: 121.33 / 133.09
Australian Dollar (Bearish Bias)
Australian Dollar Daily Chart
Australian Dollar Weekly Charts
Australian Dollar Monthly Chart
The Australian Dollar gained +0.97% over the past week. It topped in Apr/2021 and has been on a steady downtrend to present.
For the month of February the Aussie dollar has gained +0.97%. It closed the week below the short term trend 50 + 200 day moving averages and below the intermediate term trend 20 + 65 week moving averages. It closed the month of January below the long term trend 10 month moving average keeping the long term outlook bearish until months end.
(Short Term Bearish)
(Intermediate Term Bearish)
(Long Term Bearish)
Support / Resistance Levels (based upon respective time period closing price):
Weekly: 61.99 / 63.58
Monthly: 61.48 / 63.39
For the month of February the Aussie dollar has gained +0.97%. It closed the week below the short term trend 50 + 200 day moving averages and below the intermediate term trend 20 + 65 week moving averages. It closed the month of January below the long term trend 10 month moving average keeping the long term outlook bearish until months end.
(Short Term Bearish)
(Intermediate Term Bearish)
(Long Term Bearish)
Support / Resistance Levels (based upon respective time period closing price):
Weekly: 61.99 / 63.58
Monthly: 61.48 / 63.39
Canadian Dollar (Bearish Bias)
Canadian Dollar Daily Chart
Canadian Dollar Weekly Chart
Canadian Dollar Monthly Chart

The Canadian dollar gained +1.63% over the past week. It remains one of the weakest major global currencies at present and is nearing 9 year lows.
The Loonie closed the week between the short term trend 50 + 200 day moving averages and below the intermediate term trend 20 + 65 week moving averages. For the month of February the Loonie has gained +1.63%. It closed the month of January below the long term trend 10 month moving average keeping the long term bearish until months end.
(Short Term Neutral)
(Intermediate Term Bearish)
(Long Term Bearish)
Support / Resistance Levels (based upon respective time period closing price)
Weekly: 69.61 / 71.94
Monthly: 63.69 / 69.12
The Loonie closed the week between the short term trend 50 + 200 day moving averages and below the intermediate term trend 20 + 65 week moving averages. For the month of February the Loonie has gained +1.63%. It closed the month of January below the long term trend 10 month moving average keeping the long term bearish until months end.
(Short Term Neutral)
(Intermediate Term Bearish)
(Long Term Bearish)
Support / Resistance Levels (based upon respective time period closing price)
Weekly: 69.61 / 71.94
Monthly: 63.69 / 69.12
Key Weekly Returns (week ending 07 February 2025):
Countries/Regions
World Equities ACWI (iShares MSCI ACWI Index Fund) North American Equities SPY (S&P 500 SPDRs) QQQ (PowerShares QQQ Trust) IWM (Russell 2000 iShares) EWC (Canada iShares) |
Characteristics
Global Equity Fund U.S. Large Cap S&P 500 Index U.S. NASDAQ 100 Fund U.S. Russell 2000 Small Cap Fund Canada |
Week % Change
+0.12% -0.17% +0.12% -0.21% +1.04% |
Non-North America Equities
VGK (Vanguard European VIPERs) EPP (iShares MSCI Pacific ex-Japan ) EWJ (Japan iShares) EEM (iShares MSCI Emerging Markets) ILF (Latin America 40 Index iShares) Bonds
BND (Vanguard Total U.S. Bond Market) BNDX (Vanguard International Bond ETF) TIP (iShares Barclays TIPS Bond Fund) PCY (PowerShares Emerging Markets Debt Portfolio) |
Europe/U.K Pacific ex-Japan (inc. Australia + NZ) Japan Emerging Markets Latin America US Total Bond (44% Gov't Tsy, 56%Corp) World Investment Grade Bonds ex-US Inflation Protected Gov't Bonds Emerging Market Sovereign Debt |
+0.37% +0.74% +0.25% +1.12% +1.74% +0.33% +0.50% +0.40% +0.94% |
Commodities
DBC (DB Commodities Tracking Index Fund) DBA (PowerShares DB Agriculture Fund) GLD (SPDR Gold Trust Shares) SLV (iShares Silver Trust) DBB (PowerShares Metals Fund) USO (United States Oil Fund) |
Commodity Basket Soft Commodity Basket Gold Bullion Silver Bullion Industrial Metals Light Crude Oil |
+0.50% -0.11% +2.07% +1.82% +3.05% -2.77% |
Currencies
UUP (PowerShares DB US Dollar Bullish Fund)
FXA (Currency Shares Australian Dollar Trust) FXB (Currency Shares British Pound Sterling Trust) FXC (Currency Shares Canadian Dollar Trust) FXE (Currency Shares Euro Trust) FXY (Currency Shares Japanese Yen Trust) |
U.S. Dollar
Australian Dollar U.K. Sterling Canadian Dollar Euro Japanese Yen |
-0.27%
+0.94% +0.17% +1.76% -0.41% +2.56% |
Important Charts to Watch
Commodity Basket Index
Commodities (as measured by the Reuters/Jefferies CRB index; a basket of 19 commodities) bottomed in April, 2020 and peaked in June, 2022. They were highly impacted by the Covid pandemic actions and have been attempting to stabilize near 8 year highs.
Resistance @ 298.17 was broken at the start of 2025. Commodity prices strongly influence inflation so the recent breakout is indicative of returning global inflationary pressures post-Covid.
Resistance @ 298.17 was broken at the start of 2025. Commodity prices strongly influence inflation so the recent breakout is indicative of returning global inflationary pressures post-Covid.
Equity Market Volatility
The Volatility Index (VIX) is a measure of expected price fluctuations of options on the S&P 500 index options over the next 30 days (technically the VIX is quoted in percentage points and represents the expected range of movement in the S&P 500 index over the next year, at a 68% confidence level i.e. one standard deviation of the normal probability curve). For example, if the VIX is 15, this represents an expected annualized change, with a 68% probability, of less than 15% up or down.
In general it can be said there are four VIX volatility regimes:
The VXV uses the same calculation as the VIX but looks forward 3 months. When the VIX is greater than the VXV ($VIX:$VXV ratio > 1.0) the volatility structure is termed to be in "contango". It indicates traders are much more concerned about short term volatility than they are about longer term volatility and when that ratio returns to "normal" (< 0.93) it is typically a good sign market stress is easing (and a good time to add to equity positions).
As of this weeks market close volatility closed below the "VIX Event End Line" area with the VIX below 20. The volatility structure is currently BULLISH for equities.
In general it can be said there are four VIX volatility regimes:
- < 20 is trending bullish for equities
- ≈ 20-25 is choppy bullish for equities
- ≈ 25-30 is choppy bearish for equities
- > 30 is trending bearish for equities
The VXV uses the same calculation as the VIX but looks forward 3 months. When the VIX is greater than the VXV ($VIX:$VXV ratio > 1.0) the volatility structure is termed to be in "contango". It indicates traders are much more concerned about short term volatility than they are about longer term volatility and when that ratio returns to "normal" (< 0.93) it is typically a good sign market stress is easing (and a good time to add to equity positions).
As of this weeks market close volatility closed below the "VIX Event End Line" area with the VIX below 20. The volatility structure is currently BULLISH for equities.
Global Banks
Up until recently US banks were thought to be quite stable. However, several recent failures have now brought US banks into focus. Below is a chart of the KBE (US Bank ETF) and KRE (US Regional Bank ETF). We are watching closely for further signs of stress following the recent declines.
Since the 2009 market bottom Europe has been the weakest major equity growth region. As such, we continue to monitor European financial stocks (represented below using the iShares MSCI European Financials ETF).
European financials bottomed in March, 2022 and have been very strong.
European financials bottomed in March, 2022 and have been very strong.
Chinese Equities
The Shanghai Composite index was higher over the past week and remains below important resistance @ 3270-3397. It has remained rangebound since 2015.
Chinese growth remains key to both Emerging market performance as well as an indication of Developed markets demand. From its peak in mid-2015, the Shanghai index lost more than -50% to its recent lows. We would like to see significant strength return to China further indicating world economic growth has positively turned the corner.
Chinese growth remains key to both Emerging market performance as well as an indication of Developed markets demand. From its peak in mid-2015, the Shanghai index lost more than -50% to its recent lows. We would like to see significant strength return to China further indicating world economic growth has positively turned the corner.
PRECIOUS METALS
Precious metals (and their respective producers) are an area we recommend all investors consider having a small position within. Precious metals perform well during times when real (inflation adjusted) interest rates are falling and/or when the USD is weak. The following charts can be utilized to determine when the risk/reward is favorable.
Below is a ratio price chart of gold stocks (HUI; the "Gold Bugs" Index) to gold bullion going back to 1996 when the Gold Bugs Index first came into existence. As can be seen, whenever the HUI:GOLD ratio dips to below approximately 0.14 (the GREEN zone on the chart) has been a low-risk opportunity to acquire gold stocks.
Gold stocks remain in the "low-risk vs. high-reward" range and until recently remain near their cheapest valuations in 8 years. Historically purchases of gold equities when within the green-zone have been a very good long term buy-and-hold opportunities.
Gold stocks remain in the "low-risk vs. high-reward" range and until recently remain near their cheapest valuations in 8 years. Historically purchases of gold equities when within the green-zone have been a very good long term buy-and-hold opportunities.
Equally bullish is Silver (chart below) which remains at a price ratio relative to the price of gold (GREEN zone on the chart) which has historically been a low risk entry point over the past 40 years.
Silver remains cheap relative to gold.
To put the valuation into a longer term perspective, below is a chart of the Gold/Silver ratio (the opposite ratio to Silver/Gold) going back to 1687. Clearly it can be seen a gold:silver ratio > 80 has historically been an outlier over the past 100+ years (and greater than 100 is historic):
The current Gold:Silver ratio recently exceeded 120 for the 1st time in history and remains near the top end of 40 year highs. It can be seen each instance in the past 40 years where the ratio has crossed above 80 has resulted in very good long term gains in silver.
The move in Silver we have been anticipating appears to have begun but there remains plenty of room to allow the ratio to fall to the "sell" level near 45.
EVEN MORE BULLISH is the price of Platinum (chart below) which has exceeded the "buy zone" last seen in 1982! Platinum is 15-20 times rarer than gold and has rarely in history traded at a price below the price of gold (only 9.7% of the time going back to 1971). It is now the cheapest it has been GOING BACK TO AUGUST 1971 WHEN THE U.S. LEFT THE GOLD STANDARD on a relative basis:
- The current Platinum:Gold ratio remains below 0.85 (red line on the chart below).
- A Platinum/Gold ratio < 0.85 has only occurred 4.7% of the time back to 1971.
- Prior to recent lows, the lowest Platinum:Gold ratio since August 1971 (when the USD was removed from the gold standard) was hit on 20 Sept 1982 when it hit a ratio low of 0.689 (Platinum $300.40/Gold $436.00).
- If Platinum were to return to its most common ratio relative to Gold (1.0x-1.25x which has been common 35% of the time) it would imply a price rise of approximately 50-90% from recent levels.
Platinum now sits on a price support extending back to 2004 and, combined with its ratio relative to the price of gold, represents a compelling long term buy point.
The following charts and commentary (in italics; bold print is our emphasis) are sourced from Kitco from commentary sourced in Feb 2017 when the ratio was near 0.85 (Platinum has become even cheaper on a relative basis since the data was published):
Platinum to gold ratios show wide variance over the 46 year period ranging from highs above 2.5 before and soon after Nixon began taking the United States off the gold standard to periodic lows below 1.0:
Platinum to gold ratios show wide variance over the 46 year period ranging from highs above 2.5 before and soon after Nixon began taking the United States off the gold standard to periodic lows below 1.0:
Our data set covers 553 months beginning in January 1971. The distribution of ratios in both tabular and chart format follows:
Platinum/Gold Ratio: % of Months
Platinum/Gold Ratio: % of Months
- < 0.85: 4.7%
- .85-1.01: 5.0%
- 1.0-1.25: 34.7%
- 1.25-1.5: 19.3%
- 1.5-2.0: 15.4%
- 2.0-2.5: 8.9%
- > 2.5: 2.0%
From our data set and the distributions of monthly average platinum-gold ratios from January 1971 thru January 2017, I glean the following:
From a compendium of sources, the average crustal abundance of both metals is around 4 ppb. Based solely on this fact, platinum and gold should trade at about the same price.
And indeed, our compilation shows that for nearly 50% of the time since gold was decoupled from the world’s reserve currency and allowed to trade freely on exchanges, the price ratio has ranged from 0.85 to 1.25. That said, since January 1971, the average price of platinum has been $637/oz and gold has been $518/oz for an overall ratio of 1.23:1. Clearly there are other factors other than the nearly equal crustal abundances that account for this historic price relationship.
A variety of supply and demand factors cause platinum to trade at a premium to gold:
Fluctuations in the relative prices of platinum and gold are largely driven by:
Platinum functions both as a precious and industrial metal. It is usually tied to the price of gold in both short- and long-term trading patterns. In times of financial distress and economic turmoil, platinum tends to behave more like gold with widespread hoarding.
The platinum-gold ratio can be used to ascertain whether one metal is over- or undervalued with respect to the other. The current monthly average ratio below 0.85 is unusual and indicates that platinum is severely undervalued with respect to gold *
* The ratio recently hit 0.55 and remains near a record low.
- A ratio of less than 0.75 is a single outlier that occurred once during the second half of 1982 when overall ratios averaged 0.81.
- Ratios <0.85 are quite unusual at 4.7%. They occurred for two months in the first quarter of 1975, the aforementioned six months in 1982, in June-July of 1985, and for an ongoing run of 16 months that commenced in October 2015.
- Ratios from 0.85 to 1.0 constitute 15.0% of the record.
- Pt:Au from 1.0 to 1.25 is the most common range and comprises 34.7% of ratios since 1971.
- The ratios between 1.25 and 1.5 occur 19.3% of the time.
- Ratios from 1.5 to 2.0 make up 15.4% of the record.
- The 2.0-2.5 interval covers 8.9% of the months in our compendium.
- The 11 monthly outliers at >2.5 comprise 2.0% of the total record and have not occurred since 1971.
From a compendium of sources, the average crustal abundance of both metals is around 4 ppb. Based solely on this fact, platinum and gold should trade at about the same price.
And indeed, our compilation shows that for nearly 50% of the time since gold was decoupled from the world’s reserve currency and allowed to trade freely on exchanges, the price ratio has ranged from 0.85 to 1.25. That said, since January 1971, the average price of platinum has been $637/oz and gold has been $518/oz for an overall ratio of 1.23:1. Clearly there are other factors other than the nearly equal crustal abundances that account for this historic price relationship.
A variety of supply and demand factors cause platinum to trade at a premium to gold:
- Platinum is a much smaller market. Cumulative world production of platinum is estimated to be about 5% of gold (9400 tonnes versus 182,000 tonnes). From 1994-2014, 3700 tonnes of platinum were mined versus 52,600 tonnes of gold or about 7% (source: USGS).
- Platinum is largely an industrial metal. Catalytic converters, electronics, petroleum and chemical catalysts, medical technologies, and many minor uses constitute over 60% of its annual demand. Around 30% is used in jewelry and 10% for investment demand. Also, 30% of the annual platinum supply now comes from recycling, mostly from catalytic converters. Some demand is consumed and lost to the marketplace.
- Gold is overwhelmingly a precious metal; 90% is used in jewelry and investments and only 10% in industrial applications. An estimated 98% of all the gold ever mined in the world remains available and held in jewelry, by central banks, in private hoards, and as fabricated products (source: USGS).
- About 70% of yearly platinum mine supply comes from South Africa, a geopolitically risky country. Much new platinum is a by-product of nickel-copper mining and smelting; therefore, annual platinum production is dependent on the supply-demand fundamentals and prices of these primary metals.
Fluctuations in the relative prices of platinum and gold are largely driven by:
- the overall growth and health of the world’s economy and in the case of platinum, the automotive industry;
- labor, power, currency, and political issues in South Africa that cause major perturbations in the platinum supply;
- safe haven hoarding of gold and to a much lesser extent, platinum, in times of economic uncertainty and major geopolitical events; speculators moving in and out of paper markets of both metals (bullion exchanges, ETFs, and derivatives) and to a lesser extent, central bank trading of physical gold.
Platinum functions both as a precious and industrial metal. It is usually tied to the price of gold in both short- and long-term trading patterns. In times of financial distress and economic turmoil, platinum tends to behave more like gold with widespread hoarding.
The platinum-gold ratio can be used to ascertain whether one metal is over- or undervalued with respect to the other. The current monthly average ratio below 0.85 is unusual and indicates that platinum is severely undervalued with respect to gold *
* The ratio recently hit 0.55 and remains near a record low.
U.S. Equity Market Valuation
Crestmont Price/Earnings Ratio
(Source: Crestmont Research)
(Source: Crestmont Research)
A large part of the expected declines in bear markets hinges upon how "expensive" markets were when the bear market begins. In this measure, we have a long way to fall given the overvaluation at the market peak.
We illustrate the recent market overvaluation via 3 charts produced by Crestmont Research (as of 01 February 2025 with data from 1871-to-Present). While it is not necessary to understand exactly how the data is plotted, it is important for every investor to realize where current valuations stand relative to this 154 years of history.
In the following graphs note the following:
We illustrate the recent market overvaluation via 3 charts produced by Crestmont Research (as of 01 February 2025 with data from 1871-to-Present). While it is not necessary to understand exactly how the data is plotted, it is important for every investor to realize where current valuations stand relative to this 154 years of history.
In the following graphs note the following:
- the Crestmont Price/Earnings (P/E) ratio remains near the most expensive market valuation in U.S. stock market history (> 3 standard deviations about its geometric mean).
- when compared to inflation the current Crestmont P/E has now exceeded the upper extreme portion of the bubble zone defining the 1998-2000 bubble peak as shown on the 2nd chart.
- pay particular attention to chart #2 where it can be seen high equity valuations are historically supported by inflation in the 0-3% range. Inflation remains inside this corridor so markets remain vulnerable should inflation increase > 3%.
U.S. (NYSE) Margin Debt
(Source: Advisor Perspectives)
We continue to monitor with interest the current margin debt on US markets. For those who are unfamiliar, margin debt is the amount of "loans" taken out by market speculators to leverage up their equity positions. During normal bull markets margin debt will increase as the market continues to climb. This increased margin debt amplifies equity market prices. However, at some point speculators become nervous and begin to reduce their margin positions. This reduction in margin is like letting the air out of a balloon and deflates equity asset prices.
As can be seen on the below graphic, both the 2000 and 2007 market tops were signaled in advance by tops in margin debt (margin debt not inflation adjusted on this chart):
As can be seen on the below graphic, both the 2000 and 2007 market tops were signaled in advance by tops in margin debt (margin debt not inflation adjusted on this chart):
The following chart (source: D. Short) shows US equity margin debt adjusted for inflation. As can be seen, in both 2000 and 2007 inflation-adjusted margin debt peaked and then began to decline leading to the tops in the S&P 500 index. As such, margin debt rollovers acts as a good lead indicator of possible future market weakness.
A year-over-year contraction in margin debt tends to be negative for stocks as liquidity is removed from equity markets. Below is the latest YoY rate of change in margin debt (source: Yardini). Note in both the 2000 and 2007 bear markets margin debt bottomed below -40% (but the recent bottoming and return to growth in margin debt is encouraging).
U.S. Equity market Valuation Models
(Source: D. Short)
Below is a graph representing 4 different long-term valuation measures plotted back to 1900 (123 years):
As of 01 February 2025 the average of these 4 measures places the U.S. stock market (S&P 500 index) as being 163% above its long term geometric mean. This remains near the highest valuation in the history of the stock market going back to 1900 (greater than 3 standard deviations above the geometric mean).
- The Crestmont Research P/E Ratio
- The cyclical P/E ratio using the trailing 10-year earnings as the divisor
- The Q Ratio, which is the total price of the market divided by its replacement cost
- The relationship of the S&P Composite price to a regression trendline
As of 01 February 2025 the average of these 4 measures places the U.S. stock market (S&P 500 index) as being 163% above its long term geometric mean. This remains near the highest valuation in the history of the stock market going back to 1900 (greater than 3 standard deviations above the geometric mean).
Another popular valuation metric is know as the "Buffett-Indicator". In an interview with Fortune magazine back in 2001 Warren Buffett remarked "it is probably the best single measure of where valuations stand at any given moment."
The indicator measures the price of Corporate Equities (Mkt Cap) to Gross Domestic Product (GDP) as a ratio going back to 1950. As can be seen below, the ratio of equity prices relative to last reported GDP has now moved well below its recent peak and is currently in the "overvalued" zone (> 31.7% above the detrended regression line).

7-Year Asset Class Real Return Forecast
(Source: GMO LLC)
Each month GMO (Grantham, Mayo, Van Otterloo & Co.) publishes a forward forecast for expected annual real rates of return (i.e. inflation adjusted) for a number of different asset classes with a 7 year forward outlook. They have historically had a very good track record (0.97 correlation) of estimating forward 7 year asset class returns based primarily upon current valuations combined with mean reversion. Charts are published following analysis of the previous months data.
We have followed GMO's methodology with interest for many years. In our experience we have found them to be conservative over the shorter term with a tenancy to make calls too early. HOWEVER, similar to Dr. John Hussman of Hussman Funds, they also tend to be right over the longer term. As such, we use their outlook as part of the valuation model within the ECAM 5 Factor model.
Above is their current forecast of expected real returns (after inflation) for the next 7 years broken down by asset class. It is clear based upon current market valuations GMO forecasts well below average annual investment returns in all asset classes with a 7 year forward time horizon (the dotted line is the historical real return of U.S. equities of +6.5% per year). This is important for those who may be soon retiring and expecting "average" returns on their equity and bond investments over the next 7 years. Current high market valuations make it a certainty forward returns over the next 7-10 years will be well below historical averages.
We have followed GMO's methodology with interest for many years. In our experience we have found them to be conservative over the shorter term with a tenancy to make calls too early. HOWEVER, similar to Dr. John Hussman of Hussman Funds, they also tend to be right over the longer term. As such, we use their outlook as part of the valuation model within the ECAM 5 Factor model.
Above is their current forecast of expected real returns (after inflation) for the next 7 years broken down by asset class. It is clear based upon current market valuations GMO forecasts well below average annual investment returns in all asset classes with a 7 year forward time horizon (the dotted line is the historical real return of U.S. equities of +6.5% per year). This is important for those who may be soon retiring and expecting "average" returns on their equity and bond investments over the next 7 years. Current high market valuations make it a certainty forward returns over the next 7-10 years will be well below historical averages.
Global Asset Class 10-year Expected Nominal Return Forecast
(data as of 31 January, 2025)
(Source: Research Affiliates)
(data as of 31 January, 2025)
(Source: Research Affiliates)
Below is the projected 10 year nominal (non-inflation adjusted) returns for the majority of global asset classes.
Data continues to point to Emerging market, Developed market ex-US and European equities as providing the greatest equity returns over the next 10 years.
Data continues to point to Emerging market, Developed market ex-US and European equities as providing the greatest equity returns over the next 10 years.
Cycle Commentary
Below is a 20 year chart of the seasonal monthly performance of the Dow Jones Global Index. The number at the top of the column is the percentage of time the month had a positive return and at the bottom is the average percentage gain/loss for the month.
Dow Jones Global Index Market ($DJW)
As can be seen, over the past 20 years (2006-2025) the period October-April yearly offers the highest potential global equity market returns (cumulative +6.4% average return) while the period May-September offers little in total return relative to risk (0.0% cumulative average return). The month of April remains the strongest month of the calendar year with an 84% success rate and an average return of +2.3% .
S&P 500 Seasonality (historical 20 year look-back annual seasonality)
The S&P 500 Index 20 year seasonal tendency:
- flat for Jan
- in a rising trend for the first 2 weeks of Feb
- falls into an early March low
- a rising trend into a September peak
- pulls back to an early October low
- rises into year-end
Ned Davis Research 2025 Composite Model
The following is the composite directional model forecast for the S&P 500 index for 2025 based upon the following parameters (each equal weighted within the composite model) for data from 1928-2024:
- 10-year Decennial Market Cycle
- 4-year Presidential Market Cycle
- 1-year Annual Seasonal Market Cycle
The levels are not as important as the general trends/turning points as indicated by the Composite model.
The 2025 composite model indicates the following historical "glidepath" based upon previous composite cycles from 1928-2024:
- a modest up-trending market into early Feb
- a downward consolidation until late Mar
- a rising market into early Jul-late Aug
- pullback in Sep
- a rising market into year-end
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U.S. 4-Year Presidential Election Cycle
* 2025 is Year-1 ("1st Presidential Year") of the 4-year cycle
As can be seen on the chart above, historically since 1900 the 4th year (election year ) of the 4 year Presidential Cycle tends to provide average returns (+7.0%) of the 4-year cycle. It is interesting to note the returns tends to be much higher if a new president is elected (+12.2%) vs. the reelection of a current president (-0.4%).
Below are the annual returns for all Year-4 (election-year) returns since 1950.
Below are the annual returns for all Year-4 (election-year) returns since 1950.
Below is the monthly returns during the year 4 cycle. It can be seen Jan-May tend to be somewhat choppy with strong returns in Jun-Aug and weakness Sep/Oct before a year end rally.
Presidential Cycle S&P 500 returns (inc. dividends):
1988-Year 4: +12.40%
1989-Year1: +27.25% 1990-Year 2: -6.56% 1991-Year 3: +26.31% 1992-Year 4: +4.46% 1993-Year 1: +7.06% 1994-Year 2: -1.54% 1995-Year 3: +34.11% 1996-Year 4: +20.26% 1997-Year 1: +31.01% 1998-Year 2: +26.67% 1999-Year 3: +19.53% 2000-Year 4: -10.14% |
2001-Year 1: -13.04%
2002-Year 2: -23.37% 2003-Year 3: +26.38% 2004-Year 4: +8.99% 2005-Year 1: +3.00% 2006-Year 2: +13.62% 2007-Year 3: +3.53% 2008-Year 4: -38.49% 2009-Year 1: +23.45% 2010-Year 2: +12.78% 2011-Year 3: +0.00% 2012-Year 4: +13.41% 2013-Year 1: +29.60% |
2014-Year 2: +11.39%
2015-Year 3: -0.73% 2016-Year 4: +11.96% 2017-Year 1: +21.83% 2018-Year 2: -4.38% 2019-Year 3: +31.49% 2020-Year 4: +16.26% 2021-Year 1: +26.89% 2022-Year 2: -19.44% 2023-Year 3: +24.23% 2024-Year 4: +23.31% 2025-Year 1: TBD |
U.S. S&P 500 Index Bear Markets
(source: Ben Carlson, CFA)
(source: Ben Carlson, CFA)
Recessionary Bear Markets (1928-2022):
Non-Recessionary Bear Markets (1928-2022):
Recessionary vs Non-Recessionary Bear Market Returns (1928-2022):