Sentry Page Protection
Market/Model Commentary
Currently the active model portfolio as defined by our 5-factor model is:
ECAM 5-Factor Composite Model
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GREEN |
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ECONOMIC FACTOR SUB-MODEL
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TECHNICAL FACTOR SUB-MODEL
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VALUATION FACTOR SUB-MODEL
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SENTIMENT FACTOR SUB-MODEL
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LIQUIDITY (Stress) FACTOR SUB-MODEL
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"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
(09 January 2026)
Global equities were higher this past week with a percentage return (as measured by the Dow Jones Global Index) of +1.60%. This week price closed above the 40 week moving average and above price support @ 727.46.
Technical Analysis Summary (Dow Jones Global Index)
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Dow Jones Global Index Historical Monthly Returns
Global equities closed the month of December with a gain of +0.9%. We are now entering January which has historically been a weak month within the seasonal cycle:
- -3.5% cumulative percentage return over the past 25 years.
- 50.0% win percentage.
- greatest gain +7.8% (2019)
- greatest loss -8.5% (2009)
Weekly Global Macro Review
U.S. Equities
Equities advanced in the first full trading week of the year as investors largely looked past mounting geopolitical tensions, pushing most major indexes to all-time highs. Small-cap and value shares outpaced the large-cap growth stocks that have led returns in recent years, while an equal-weighted version of the S&P 500 Index outperformed its market cap-weighted counterpart.
Equities advanced in the first full trading week of the year as investors largely looked past mounting geopolitical tensions, pushing most major indexes to all-time highs. Small-cap and value shares outpaced the large-cap growth stocks that have led returns in recent years, while an equal-weighted version of the S&P 500 Index outperformed its market cap-weighted counterpart.
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S&P 500:
DJIA: NASDAQ 100: S&P 400 Mid-cap: Russell 2000 Small Cap: |
+1.6%
+2.3% +2.2% +3.3% +4.6% |
The week also saw several notable industry-level moves in response to a flurry of policy announcements from President Donald Trump. Stocks of aerospace and defense companies were hurt on Wednesday by comments that Trump “will not permit” them to pay dividends or repurchase shares unless they accelerate production of military hardware. The next day, defense stocks rallied after the administration proposed a sizable increase in military spending, as investors priced in the potential for higher government outlays.
Similarly, shares of homebuilders and related industries initially came under pressure after the administration said it would seek to restrict institutional purchases of single-family homes. However, the group rebounded later in the week after Trump announced that he was instructing government-controlled mortgage companies Fannie Mae and Freddie Mac to buy USD 200 billion of mortgage bonds to help drive down lending rates.
The week also brought a heavy dose of economic data releases, including several labor market reports that generally surprised to the downside. Most notably, the Labor Department released its closely watched nonfarm payrolls report on Friday, which showed that U.S. employers added a lighter-than-expected 50,000 jobs in December, while October’s and November’s readings were revised down by a combined 76,000. However, on the more positive side, the unemployment rate ticked down to 4.4% from a revised 4.5% in the prior month.
The Labor Department’s Job Openings and Labor Turnover Summary for November provided another sign of cooling in the U.S. labor market. According to the report, hires declined to 5.1 million for the month, down from 5.4 million in October, while job openings dropped to the lowest level since September 2024 at 7.1 million.
Elsewhere, private payrolls processing firm ADP reported that private employers added 41,000 jobs in December, rebounding from a net loss of jobs in the prior month but falling short of estimates for around 47,000 jobs added.
Data from the Institute for Supply Management (ISM) showed that economic activity in the U.S. manufacturing sector contracted for the 10th consecutive month in December, as the ISM’s Manufacturing Purchasing Managers’ Index (PMI) declined by 0.3 points to 47.9, the lowest reading of 2025 (readings below 50 indicate contraction). The employment index remained in contraction for the 11th straight month, while the prices index stayed in expansion—indicating rising input prices—for the 15th consecutive month.
On the other hand, the ISM’s measure of services activity expanded for the 10th month in a row. Gains in new orders, business activity, and a rebound in employment from contraction to expansion helped push the Services PMI to the highest reading of the year. Price pressures also eased somewhat, although the services prices index remained solidly in expansion territory.
US Bonds
Government securities were higher heading into Friday, with some long-term yields decreasing modestly and short-term yields inching higher. (Bond prices and yields move in opposite directions.) Treasuries rallied early in the week in response to some weaker-than-expected economic data, but follow-through was limited and trading activity was muted overall.
Investment-grade corporate bonds also posted positive returns amid heavy issuance that was met with solid demand, while high yield bonds strengthened as trading activity picked up following the holiday lull, with investors focusing on new bond offerings and company-specific developments.
Similarly, shares of homebuilders and related industries initially came under pressure after the administration said it would seek to restrict institutional purchases of single-family homes. However, the group rebounded later in the week after Trump announced that he was instructing government-controlled mortgage companies Fannie Mae and Freddie Mac to buy USD 200 billion of mortgage bonds to help drive down lending rates.
The week also brought a heavy dose of economic data releases, including several labor market reports that generally surprised to the downside. Most notably, the Labor Department released its closely watched nonfarm payrolls report on Friday, which showed that U.S. employers added a lighter-than-expected 50,000 jobs in December, while October’s and November’s readings were revised down by a combined 76,000. However, on the more positive side, the unemployment rate ticked down to 4.4% from a revised 4.5% in the prior month.
The Labor Department’s Job Openings and Labor Turnover Summary for November provided another sign of cooling in the U.S. labor market. According to the report, hires declined to 5.1 million for the month, down from 5.4 million in October, while job openings dropped to the lowest level since September 2024 at 7.1 million.
Elsewhere, private payrolls processing firm ADP reported that private employers added 41,000 jobs in December, rebounding from a net loss of jobs in the prior month but falling short of estimates for around 47,000 jobs added.
Data from the Institute for Supply Management (ISM) showed that economic activity in the U.S. manufacturing sector contracted for the 10th consecutive month in December, as the ISM’s Manufacturing Purchasing Managers’ Index (PMI) declined by 0.3 points to 47.9, the lowest reading of 2025 (readings below 50 indicate contraction). The employment index remained in contraction for the 11th straight month, while the prices index stayed in expansion—indicating rising input prices—for the 15th consecutive month.
On the other hand, the ISM’s measure of services activity expanded for the 10th month in a row. Gains in new orders, business activity, and a rebound in employment from contraction to expansion helped push the Services PMI to the highest reading of the year. Price pressures also eased somewhat, although the services prices index remained solidly in expansion territory.
US Bonds
Government securities were higher heading into Friday, with some long-term yields decreasing modestly and short-term yields inching higher. (Bond prices and yields move in opposite directions.) Treasuries rallied early in the week in response to some weaker-than-expected economic data, but follow-through was limited and trading activity was muted overall.
Investment-grade corporate bonds also posted positive returns amid heavy issuance that was met with solid demand, while high yield bonds strengthened as trading activity picked up following the holiday lull, with investors focusing on new bond offerings and company-specific developments.
Europe/UK Equities
In local currency terms, the pan-European STOXX Europe 600 Index ended +2.3% higher amid continuing optimism about the economy, company earnings, and a favorable interest rate backdrop.
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German DAX:
French CAC: Italian MIB: Spanish IBEX: U.K. FTSE 100: |
+2.9%
+2.0% +0.8% +0.9% +1.7% |
The Eurozone economy appeared to be strengthening toward the end of 2025 amid evidence that Germany may have turned a corner.
Industrial production in Germany, France, and Spain came in better than forecast in November. German output increased sequentially by a seasonally adjusted 0.8%, rather than shrinking 0.5% as predicted by a consensus estimate. This came on top of a jump in manufacturing orders, which grew 5.6% month over month, defying forecasts for a 1.3% decline. In Spain, non-seasonally adjusted production rose 1.0% sequentially, an acceleration from the 0.6% logged in October. France’s industrial output contracted by a seasonally adjusted 0.1% in November, which was less than the 0.2% predicted.
Separately, retail sales in the bloc grew in November by 0.2% versus the prior month, while the annual rate picked up to 2.3%, beating forecasts for 1.6% after a major upward revision to October’s numbers.
Headline annual inflation in the Eurozone slowed to the European Central Bank’s (ECB’s) target of 2.0% in December, down a tick from November. The core rate, which excludes volatile food and energy costs, fell to 2.3% from 2.4%. But services inflation, which is closely watched by the ECB, eased only slightly to 3.4%.
The number of mortgages approved by British lenders for house purchases fell to 64,530 in November from 65,010 in October, Bank of England data showed. Halifax, a mortgage lender, said house prices unexpectedly fell in December by 0.6% sequentially, after dipping 0.1% in November, as economic and tax uncertainty damped sentiment at the end of last year.
Industrial production in Germany, France, and Spain came in better than forecast in November. German output increased sequentially by a seasonally adjusted 0.8%, rather than shrinking 0.5% as predicted by a consensus estimate. This came on top of a jump in manufacturing orders, which grew 5.6% month over month, defying forecasts for a 1.3% decline. In Spain, non-seasonally adjusted production rose 1.0% sequentially, an acceleration from the 0.6% logged in October. France’s industrial output contracted by a seasonally adjusted 0.1% in November, which was less than the 0.2% predicted.
Separately, retail sales in the bloc grew in November by 0.2% versus the prior month, while the annual rate picked up to 2.3%, beating forecasts for 1.6% after a major upward revision to October’s numbers.
Headline annual inflation in the Eurozone slowed to the European Central Bank’s (ECB’s) target of 2.0% in December, down a tick from November. The core rate, which excludes volatile food and energy costs, fell to 2.3% from 2.4%. But services inflation, which is closely watched by the ECB, eased only slightly to 3.4%.
The number of mortgages approved by British lenders for house purchases fell to 64,530 in November from 65,010 in October, Bank of England data showed. Halifax, a mortgage lender, said house prices unexpectedly fell in December by 0.6% sequentially, after dipping 0.1% in November, as economic and tax uncertainty damped sentiment at the end of last year.
Japan
Japan’s stock markets registered strong gains over the week, with the Nikkei 225 Index rising +3.2% and the broader TOPIX Index up +3.1%. Geopolitical and trade tensions between China and Japan failed to dent the markets’ advance. Technology companies continued to rally while yen weakness provided a boost to export-oriented companies and trading houses.
The yield on the 10-year Japanese government bond ticked up slightly to 2.09% from 2.07% at the end of the previous week. Upward pressure on yields continued to be exerted by expectations of further interest rate hikes by the Bank of Japan (BoJ) in 2026. BoJ Governor Kazuo Ueda said during the week that the central bank will keep raising rates in line with improvements in the economy and inflation. He added that the mechanism between moderate wage growth and inflation is likely to be maintained.
In the latest economic data, Japan’s household spending rose 2.9% year over year in November, outpacing expectations of a 1.0% decline and following a 3.0% fall in October. The solid rebound in spending was primarily due to an increase in households’ auto purchases. Even excluding the often-volatile category of auto spending, outlays on food and dining increased, boosted by the two November holidays, suggesting that a recovery in consumer spending is becoming more entrenched. This was despite a fall in households’ purchasing power in November, with real (inflation-adjusted) wages contracting 2.8% year over year.
China
Mainland Chinese stock markets gained, fueled by artificial intelligence trades. The CSI 300 Index, the main onshore benchmark, added +2.8%, retreating from a four-year high it hit earlier in the week. The Shanghai Composite Index advanced +3.8%, while Hong Kong’s benchmark Hang Seng Index shed -0.4%. Optimism about the domestic tech sector fueled the weekly advance.
On the economic front, inflation data showed that consumer price growth picked up in December, though producer prices fell for the 39th straight month. China’s consumer price index (CPI) rose 0.8% in December from a year ago, in line with forecasts, the country’s statistics bureau reported. The producer price index fell 1.9%, the smallest decrease in more than a year. The core CPI, which strips out food and energy, increased 1.2% for the third straight month.
Unlike most Western countries, China has struggled with deflation since the end of the pandemic, as a prolonged housing downturn and overproduction in several industries have weighed on domestic consumption and corporate profits. Inflation for the full calendar year was zero, the lowest level since 2009 and well below China’s official target of about 2%, Bloomberg reported, citing official data. The latest inflation report supported the view of some economists that China’s central bank will continue to ease policy in 2026.
Weekly Performance
U.S. Indices
Dow +2.3% to 49,504. S&P 500 +1.6% to 6,966. Nasdaq +1.9% to 23,671. Russell 2000 +4.6% to 2,623. CBOE Volatility Index -0.1% to 14.49.
S&P 500 Sectors
Consumer Staples +2.1%. Utilities -1.6%. Financials +1.4%. Telecom +2.4%. Healthcare +1.1%. Industrials +2.5%. Information Technology flat. Materials +4.8%. Energy +2.1%. Consumer Discretionary +5.8%. Real Estate +0.5%.
World Indices
London +1.7% to 10,125. France +2% to 8,362. Germany +2.9% to 25,262. Japan +3.2% to 51,940. China +3.8% to 4,120. Hong Kong -0.4% to 26,232. India -2.6% to 83,576.
Commodities and Bonds
Crude Oil WTI +3.1% to $59.12/bbl. Gold +4% to $4,500.9/oz. Natural Gas -12.4% to 3.169. Ten-Year Bond Yield -0.2 bps to 4.171.
Forex and Cryptos
EUR/USD -0.7%. USD/JPY +0.67%. GBP/USD -0.42%. Bitcoin flat. Litecoin -1.2%. Ethereum -1.3%. XRP +3.9%.
Dow +2.3% to 49,504. S&P 500 +1.6% to 6,966. Nasdaq +1.9% to 23,671. Russell 2000 +4.6% to 2,623. CBOE Volatility Index -0.1% to 14.49.
S&P 500 Sectors
Consumer Staples +2.1%. Utilities -1.6%. Financials +1.4%. Telecom +2.4%. Healthcare +1.1%. Industrials +2.5%. Information Technology flat. Materials +4.8%. Energy +2.1%. Consumer Discretionary +5.8%. Real Estate +0.5%.
World Indices
London +1.7% to 10,125. France +2% to 8,362. Germany +2.9% to 25,262. Japan +3.2% to 51,940. China +3.8% to 4,120. Hong Kong -0.4% to 26,232. India -2.6% to 83,576.
Commodities and Bonds
Crude Oil WTI +3.1% to $59.12/bbl. Gold +4% to $4,500.9/oz. Natural Gas -12.4% to 3.169. Ten-Year Bond Yield -0.2 bps to 4.171.
Forex and Cryptos
EUR/USD -0.7%. USD/JPY +0.67%. GBP/USD -0.42%. Bitcoin flat. Litecoin -1.2%. Ethereum -1.3%. XRP +3.9%.
WEEKLY ASSET CLASS MONITOR
(week ending 09 January 2026)
(week ending 09 January 2026)
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Asset Class
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Region
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ETF Ticker
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Weekly
Return |
2026 Return
(inc. Dividends) |
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Equities
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World
U.S. Europe Asia Pacific ex-Japan Emerging Market |
VT
VTI VGK AAXJ VWO |
+1.75%
-1.81% +1.43% +1.65% +0.91% |
+2.50%
+2.13% +2.58% +4.82% +3.11% |
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Bonds
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U.S. Bonds
International Bonds Global Bonds |
BND
BNDX BNDW |
+0.34%
+0.48% +0.41% |
+0.30%
+0.45% +0.39% |
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Real Estate Equities
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Global Real Estate Equities
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REET
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+1.12%
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+1.52%
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Precious Metals Equities
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Global Gold Miners
Global Junior Gold Miners |
RING
GDXJ |
+8.05%
+7.73% |
+7.93%
+7.18% |
GLOBAL EQUITY MARKET MONITOR
The past 5 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 a significant drop/rise "V" reversal in April 2025 as announced US tariffs were postponed until July.
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 a significant drop/rise "V" reversal in April 2025 as announced US tariffs were postponed until July.
Asset Class Return Monitor
(for week ending 09 January 2026)
(for week ending 09 January 2026)
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 +1.75%.
- Asia Pacific ex-Japan markets were the top performing equity region this past week with Emerging 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 up +0.72%.
Year-to-Date (2026) Asset Class returns
- In 2026 global equities (as measured by the Vanguard Total World Stock ETF shown in CYAN) have gained +2.50.
- Asia Pacific ex-Japan market equities are the top performing equity region year-to-date with US markets lagging.
- Bonds have had positive returns in 2026 with U.S. bonds (Black) under-performing International Bonds (Green).
- The US Dollar index has gained +0.87% 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.
- Overall world equity performance (as measured by the Vanguard Total World ETF) have returned +24.89% (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 Emerging markets the weakest.
- Positive equity returns have been evident over the past quarter (3 months) in monitored regions.
1 Month Rolling Regional Equity Performance
- Over the past 1 month rolling period the strongest performing world equity region has been Asia Pacific ex-Japan markets with US 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 equity regions were higher with Japanese 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 +1.60%. Price closed above the 52 week moving average (green line) and below support @ 727.46.
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 reached new all-time highs in December 2025.
For the month of January ACWI has gained +2.30%. It closed the month of December 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 January ACWI has gained +2.30%. It closed the month of December 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 +1.59%. Price closed above the 40 week simple moving average (shown in GREEN) and above support.
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)
The RRG trend analysis status is currently NEUTRAL For world equities:
- ACWI Weekly Quadrant: WEAKENING Quadrant
- 24 Country Net Score: POSITIVE
- ACWI price Relative Strength (horizontal axis): POSITIVE
- ACWI price Momentum (vertical axis): NEGATIVE
Coincident Equity Market Indicators
Crude Oil
Crude oil was higher over the past week and closed back within its previous range. 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 closed within their previous range. The 3-month correlation between commodities and global equities is positive.
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 negative.
Current 5-Factor Model Indications
The combined 5-Factor quantitative model is currently YELLOW (neutral). This indicates an elevated level of risk at present. The 5-Factor model currently has the following sub-model readings:
Economic Model
The Economic model is currently YELLOW. 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 08 December 2025)
(data as of 08 December 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.
A CLI reading above (below) 100 is always an indication that anticipates levels of GDP above (below) long-term trend.
A CLI reading above (below) 100 is always an indication that anticipates levels of GDP above (below) long-term trend.
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J.P. Morgan Purchasing Managers Index (PMI)
(06 January 2026)
(06 January 2026)
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.
Global Composite Output Index
- Global Composite Output Index decreased to 52.0 (52.7 the previous month) and remains in modest expansion.
- It remains below its long term average Global PMI measure of 53.2.
World Bank Global Monthly Outlook
(November/December 2025)
(November/December 2025)
U.S. Economic Growth & Inflation
Year-over-Year GDP growth
The US economy expanded 2.3% year-on-year in the third quarter of 2025, higher than 2.1% in the previous estimate. Consumer spending went up 2.6%, fixed investment rose 2.6%, public expenditure increased 1.1%, exports expanded 1.5% and imports fell 1.8%.
Quarter-over-Quarter GDP growth
The GDP in the US advanced an annualized 4.3% in Q3 2025, the most in two years compared to 3.8% in Q2, and forecasts of 3.3%, the delayed estimate showed. The growth mainly reflected increases in consumer spending, exports, and government spending. Consumer spending rose 3.5%, the most so far this year (vs 2.5% in Q2), led by both goods (3.1% vs 2.2%) and services (3.7% vs 2.6%), mostly health care, international travel, information processing equipment and prescription drugs. Fixed investment continued to rise although at a slower pace (1% vs 4.4%), supported by equipment (5.4% vs 8.5%) and intellectual property products (5.4% vs 15%) while investment in structures (-6.3% vs -7.5%) and residential (-5.1% vs -5.1%) continued to decline. Also, exports rebounded sharply (8.8% vs -1.8%) due to capital and nondurable goods and imports declined further (-4.7% vs -29.3%). Government spending recovered (2.2% vs -0.1%) and the drag from private inventories was smaller (-0.22 pp vs -3.44 pp).
Annualized Inflation
The annual inflation rate in the US came in at 2.7% in November 2025, the lowest since July, below forecast of 3.1% and 3% reported for September. The energy index increased 4.2%, with gasoline rising 0.9%, fuel oil soaring 11.3% and natural gas gaining 9.1%. Also, food prices rose 2.6%, shelter cost was up 3% and other notable increases were recorded for medical care (2.9%), household furnishings and operations (4.6%), recreation (1.8%), and used cars and trucks (3.6%). The lowest price increases were recorded for apparel (0.2%) and new vehicles (0.6%). Meanwhile, annual core inflation came in at 2.6%, the lowest since March 2021, compared to forecasts of 3%. The BLS did not collect data for October 2025 due to the 43-day government shutdown. As a result, October figures were missing, and November monthly data were not released. However, the BLS said that the CPI increased 0.2% over the 2 months from September to November 2025.
Eurozone Economic Growth & Inflation
Year-over-Year GDP growth
Eurozone GDP grew 1.4% year-on-year in the third quarter of 2025, compared to the 1.6% expansion recorded in both the first and second quarters, and broadly in line with the previous estimate. A slowdown was seen in household expenditure (1.1% vs 1.6%) and investment (2.5% vs 3.2%) while faster growth was recorded for government spending (1.7% vs 1.5%), exports (2.7% vs 0.5%) and imports (3.6% vs 2.7%). Spain led the major economies, expanding 2.8% (vs 3% in Q2), followed by the Netherlands at 1.6% (vs 1.7%) and France at 0.9% (up from 0.7%). Italy GDP growth was faster (0.6% vs 0.5%) and in Germany remained steady at 0.3%. GDP growth rate was also unchanged in Belgium at 1%. Compared to Q2, the Eurozone economy expanded by 0.3%, up from 0.1% in Q2 and better than 0.2% in the initial estimates.
Quarter-over-Quarter GDP growth
The Gross Domestic Product (GDP) In the Euro Area expanded 0.30 percent in the third quarter of 2025 over the previous quarter. GDP Growth Rate in the Euro Area averaged 0.38 percent from 1995 until 2025, reaching an all time high of 11.60 percent in the third quarter of 2020 and a record low of -11.10 percent in the second quarter of 2020.
Annualized Inflation
Euro area consumer price inflation eased to 2.0% in December 2025, down from 2.1% in November, according to a preliminary estimate. This marks the lowest rate since August, returning to the ECB’s midpoint target and reinforcing expectations that interest rates are likely to remain steady for the foreseeable future. The slowdown reflected a modest easing in price growth for services (3.4% vs. 3.5% in November) and non-energy industrial goods (0.4% vs. 0.5%), alongside a sharper decline in energy costs (-1.9% vs. -0.5%). In contrast, prices for food, alcohol, and tobacco accelerated slightly to 2.6% from 2.4%. Core inflation, which excludes energy, food, alcohol, and tobacco, fell to 2.3%, the lowest in four months and just below expectations of 2.4%. Among Europe’s largest economies, HICP rates eased in Germany (2.0% vs. 2.6%), France (0.7% vs. 0.8%), and Spain (3.0% vs. 3.2%), while Italy bucked the trend with harmonized inflation rising slightly to 1.2% from 1.1%.
Japan Economic Growth & Inflation
Year-over-Year Annual GDP growth
The gross domestic product in Japan expanded 1.1% year-on-year in the third quarter of 2025, easing from a 2% growth in the previous period. GDP Annual Growth Rate in Japan averaged 1.70 percent from 1981 until 2025, reaching an all time high of 9.40 percent in the first quarter of 1988 and a record low of -9.70 percent in the second quarter of 2020.
Quarter-over-Quarter GDP growth
Japan’s GDP contracted 0.4% qoq in Q3 2025, reversing an upwardly revised 0.6% growth in Q2 but performing slightly better than market expectations of a 0.6% decline, preliminary data showed. It was the first quarterly drop since Q1 2024, reflecting subdued private consumption (0.1% vs 0.4%) amid lingering cost pressures, particularly elevated rice prices and rising utility bills. Net trade also contributed negatively (-0.2 ppts), with exports (-1.2% vs 2.3%) falling faster than imports (-0.1% vs 1.3%) after Washington imposed a 15% baseline tariff on most Japanese goods in September. Still, government spending (0.5% vs 0.1%) and business investment (1.0% vs 0.8%) recorded their strongest gains in five quarters, supported by front-loaded public works and corporate upgrades to production capacity. The latest print comes as Prime Minister Sanae Takaichi’s administration prepares a stimulus package to ease rising living-cost pressures and support exporters facing higher U.S. tariffs.
Annualized Inflation
Japan’s annual inflation rate edged down to 2.9% in November 2025 from October's 3-month high of 3.0%, as food inflation hit its lowest in a year (6.1% vs 6.4% in October) amid the slowest rise in 15 months for rice prices. Price growth also slowed for clothing (2.3% vs 2.5%), transport (3.3% vs 3.6%), recreation (2.3% vs 2.6%), communications (6.8% vs 7.5%), and miscellaneous goods (0.6% vs 0.7%), while education costs fell further (-5.6% vs -5.6%). In contrast, inflation was unchanged for housing (at 0.9%), household items (at 1.8%), and healthcare (at 0.8%). Meanwhile, utility prices rose further, with electricity inflation accelerating (4.9% vs 3.5%), while gas prices maintained their increase (0.7% vs 0.7%). Meanwhile, core inflation stood at 3.0%, keeping the same pace as in October and remaining above the Bank of Japan’s 2% target for the 44th straight month. Monthly, the CPI rose 0.4%, matching October's reading and staying at its highest in eight months.
China Economic Growth & Inflation
Year-over-Year GDP growth
China’s economy expanded 4.8% year-on-year in Q3 2025, down from 5.2% in Q2, marking its slowest pace since Q3 2024. While in line with market expectations, the GDP growth has lost momentum after a strong start to the year, pressured by U.S. trade tensions, a prolonged property slump, and soft consumer demand. September data showed retail sales in China rose at their slowest pace in a year despite ongoing consumer subsidy programs, while the jobless rate edged down but remained near August’s six-month high. Industrial output, however, grew at its fastest pace in three months ahead of Golden Week. On the trade front, exports and imports beat forecasts as firms pushed into new markets and domestic demand was boosted by holiday spending. China’s statistics bureau cautioned that risks and external headwinds persist, with the recovery’s foundation still fragile. Still, it said that 5.2% growth in the first nine months lays a “solid foundation” for meeting a full-year target of around 5%.
Quarter-over-Quarter GDP growth
China’s GDP grew 1.1% quarter-on-quarter in Q3 2025, beating market expectations of 0.8% and following a marginally revised 1.0% gain in Q2. The stronger-than-expected performance reflects Beijing’s policy support, including liquidity injections to stabilize credit markets and curb deflationary pressures amid weak demand. The central bank also signaled plans to cut rates “at an appropriate time” to boost lending and investment further. However, renewed U.S.-China trade tensions underscore vulnerabilities in China’s export-driven economy, with President Trump threatening tariffs of up to 100% on Chinese goods from November 1, though both sides have expressed willingness to ease disputes. China’s statistics agency noted that external uncertainties, weak domestic demand, and operational strains among firms continue to challenge economic stability. A spokesperson said the Chinese economy is like “a vast ocean, not a small pond, capable of withstanding storms and even tempests.”
Annualized Inflation
China’s annual inflation rate edged higher to 0.8% in December 2025 from 0.7% in the prior month, marking the highest level since February 2023 but falling short of market forecasts for 0.9%. The latest result also pointed to the third straight month of consumer inflation, with food prices rising the most in 14 months (1.1% vs 0.2% in November), driven by sharper price increases in fresh vegetables and fresh fruit. Meanwhile, non-food inflation remained steady (at 0.8%), helped by ongoing consumer trade-in programs. Prices continued to rise for clothing (1.7% vs 1.9%), healthcare (1.8% vs 1.6%), and education (0.9% vs 0.8%). In contrast, housing prices fell 0.2% after being flat previously, while transport costs dropped further (-2.6% vs -2.3%). Core inflation, which excludes food and energy, held at 1.2% yoy, staying at its highest in 20 months. Monthly, the CPI rose 0.2%, after a 0.1% drop in November. For the whole year, inflation was flat, below the official target of around 2%.
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 Apr 2025 following their Feb-Mar/25 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 GREEN.
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 Int'l Gov't Inflation-Protected Bonds with US Gov't 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 Int'l Gov't Inflation-Protected Bonds with Int'l Gov't 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 Int'l Gov't Inflation-Protected Bonds with Int'l Gov't Treasury Bonds lagging.
- The U.S. Total Bond Market (RED) and the International (ex-U.S.) Total Bond Market (BLUE) have delivered higher returns over the past month.
Past Week Bond Asset Class Performance
- Over the past week Int'l Gov't Inflation-Protected 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 +0.41% over the past week. They had remained rangebound since Jul/2024 before their recent breakout 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 @ 4.213% and below 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 @ 2.89%.
Japanese 10 year Treasury Yield
Japan had been fighting deflation for decades but recent unprecedented monetary policy by the BOJ appears to be having effect upon inflation (and rising yields).
After bottoming at near -0.28% in mid-2016, yields rose and were able to finally break above 0.15% in early 2022.
The BOJ ended yield curve control (YCC) at the end of March, 2024 and since this period rates have been set by market demand . This past week yields closed above support @ 1.55% and above the 52 week moving average.
After bottoming at near -0.28% in mid-2016, yields rose and were able to finally break above 0.15% in early 2022.
The BOJ ended yield curve control (YCC) at the end of March, 2024 and since this period rates have been set by market demand . This past week yields closed above support @ 1.55% 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 US 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 Japanese Yen lagging.
1 Month Rolling Currency Performance
- Over the past 1 month rolling period the top performing currency has been Gold with the Japanese Yen lagging.
Past Week (7-day) Currency Performance
- Over the past week the top performing major currency was Gold with the Canadian Dollar lagging.
U.S. Dollar: (Bearish Bias)
Commentary:
The USD was up +0.72% over the past week. It had been rangebound and confined to an 8-point consolidation range since late 2022 before its recent breakdown.
Support / Resistance Levels (based upon respective time period closing price):
Weekly: 97.18 / 99.19
Monthly: 93.03 / 100.21
Support / Resistance Levels (based upon respective time period closing price):
Weekly: 97.18 / 99.19
Monthly: 93.03 / 100.21
US Dollar Index Daily charts
The 2 year daily chart (above) shows the trading range the USD has been confined to since Apr 2025. The 100.32-100.88 remains an important support/resistance zone.
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 in 2025. Price closed the week between the intermediate term trend 20 and 65 week moving averages.
(Intermediate Term Neutral)
(Intermediate Term Neutral)
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 January the U.S. Dollar index has gained +0.87%. Price remains confined to the rising price channel from the 2011 lows and remains at strong monthly resistance @ 98.66-100.21.
Price closed December below the long term trend 10 month moving average keeping the long term bias Bearish until months end.
(Long Term Bearish)
Price closed December below the long term trend 10 month moving average keeping the long term bias Bearish until months end.
(Long Term Bearish)
Euro (Bullish Bias)
The Euro was down -0.71% over the past week. It has remained largely range bound between 105-112 over the past year before its most recent breakout.
Support / Resistance Levels (based upon respective time period closing price):
Weekly: 114.47 / 120.35
Monthly: 113.81 / 122.36
Support / Resistance Levels (based upon respective time period closing price):
Weekly: 114.47 / 120.35
Monthly: 113.81 / 122.36
Euro Daily Charts
The Euro topped out in late 2020 @ 123.28 and had been on a steady decline until September 2022. It rose dramatically into the end of 2022 and had remained range bound in 2023-24 before its recent breakout.
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 (which should now act as support).
The Euro closed the week between the short term trend 50 and 200 day moving averages.
(Short Term Neutral)
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 (which should now act as support).
The Euro closed the week between the short term trend 50 and 200 day moving averages.
(Short Term Neutral)
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 between the intermediate trend 20 week + 65 week moving averages.
(Intermediate Term Neutral)
This past week the Euro closed the week between the intermediate trend 20 week + 65 week moving averages.
(Intermediate Term Neutral)
Euro Monthly
For the month of January the Euro has lost -0.94%. On a monthly closing basis it closed the month of December above the long term trend 10 month moving average keeping the long term outlook bearish until months end.
(Long Term Bullish)
(Long Term Bullish)
UK Pound (Bullish Bias)
U.K. Pound Daily Charts
U.K. Pound Weekly Charts
U.K. Pound Monthly Charts
The British Pound was down -0.42% 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 above its short term trend daily 50 +200 day moving averages and above the intermediate term trend 20 + 65 week moving averages. For the month of January it has lost -0.52% and closed the month of December above its long term 10 month moving average (which technically switches the long term bullish until months end).
(Short Term Bullish)
(Intermediate Term Bullish)
(Long Term Bullish)
Support / Resistance Levels (based upon respective time period closing price):
Weekly: 132.94 / 136.76
Monthly: 132.64 / 139.17
This past week the Pound closed the week above its short term trend daily 50 +200 day moving averages and above the intermediate term trend 20 + 65 week moving averages. For the month of January it has lost -0.52% and closed the month of December above its long term 10 month moving average (which technically switches the long term bullish until months end).
(Short Term Bullish)
(Intermediate Term Bullish)
(Long Term Bullish)
Support / Resistance Levels (based upon respective time period closing price):
Weekly: 132.94 / 136.76
Monthly: 132.64 / 139.17
Australian Dollar (Bullish Bias)
Australian Dollar Daily Chart
Australian Dollar Weekly Charts
Australian Dollar Monthly Chart
The Australian Dollar lost -0.05% over the past week. It topped in Apr/2021 and has been on a steady downtrend to present.
For the month of January the Aussie dollar has gained +0.20%. It closed the week above the short term trend 50 + 200 day moving averages and above the intermediate term trend 20 + 65 week moving averages. It closed the month of December above the long term trend 10 month moving average keeping the long term outlook bullish until months end.
(Short Term Bullish)
(Intermediate Term Bullish)
(Long Term Bullish)
Support / Resistance Levels (based upon respective time period closing price):
Weekly: 62.86 / 67.35
Monthly: 63.58 / 70.56
For the month of January the Aussie dollar has gained +0.20%. It closed the week above the short term trend 50 + 200 day moving averages and above the intermediate term trend 20 + 65 week moving averages. It closed the month of December above the long term trend 10 month moving average keeping the long term outlook bullish until months end.
(Short Term Bullish)
(Intermediate Term Bullish)
(Long Term Bullish)
Support / Resistance Levels (based upon respective time period closing price):
Weekly: 62.86 / 67.35
Monthly: 63.58 / 70.56
Canadian Dollar (Bullish Bias)
Canadian Dollar Daily Chart
Canadian Dollar Weekly Chart
Canadian Dollar Monthly Chart
The Canadian dollar lost -1.32% over the past week. Until recently it has been one of the weakest major global currencies but has recovered from 9 year lows in 2025.
The Loonie closed the week below the short term trend 50 + 200 day moving averages and between the intermediate term trend 20 + 65 week moving averages. For the month of January the Loonie has lost -1.50%. It closed the month of December above the long term trend 10 month moving average switching the long term bullish until months end.
(Short Term Bearish)
(Intermediate Term Neutral)
(Long Term Bullish)
Support / Resistance Levels (based upon respective time period closing price)
Weekly: 70.91 / 73.62
Monthly: 72.07 / 75.83
The Loonie closed the week below the short term trend 50 + 200 day moving averages and between the intermediate term trend 20 + 65 week moving averages. For the month of January the Loonie has lost -1.50%. It closed the month of December above the long term trend 10 month moving average switching the long term bullish until months end.
(Short Term Bearish)
(Intermediate Term Neutral)
(Long Term Bullish)
Support / Resistance Levels (based upon respective time period closing price)
Weekly: 70.91 / 73.62
Monthly: 72.07 / 75.83
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.
Commodity prices strongly influence inflation and the current trading range is indicative of stable global inflationary pressures.
Commodity prices strongly influence inflation and the current trading range is indicative of stable global inflationary pressures.
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
An important measure of economic stability is the performance of bank stocks. Below is a chart of the KBE (US Bank ETF) and KRE (US Regional Bank ETF). Both remain near recent highs indicating very little financial stress in the US.
Similarly, European financial stocks (represented below using the iShares MSCI European Financials ETF) continue to advance from their Oct/2022 lows and currently exhibit very little European financial stress.
Chinese Equities
The Shanghai Composite index was higher over the past week and closed above important support @ 3558-3703. It has remained rangebound since 2015 before the most recent breakout.
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. Significant strength returning to China further indicates that 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. Significant strength returning to China further indicates that 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 have recently broken out of their "low-risk vs. high-reward" range but remain below the crucial 0.20 range which has capped gold stocks since 2014. Historically purchases of gold equities when within the green-zone have been a very good long term buy-and-hold opportunities.
Gold stocks have recently broken out of their "low-risk vs. high-reward" range but remain below the crucial 0.20 range which has capped gold stocks since 2014. 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 broke out of the 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 is now neutral on a relative basis 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 has now broken below the 65 area which has been the limit to silver advances over the past 10 years. The next silver target sell area is the 45 ratio.
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 has now broken out and is rapidly trying to regain its historic price level greater than the price of gold.
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)
The Crestmont P/E ratio is a valuation metric used to assess the stock market's price-to-earnings ratio with a focus on long-term, inflation-adjusted earnings. It was developed by Crestmont Research and is designed to provide a more stable and consistent measure of market valuation compared to traditional P/E ratios.
What It Measures:
We illustrate the recent market overvaluation via 3 charts produced by Crestmont Research. In the following graphs note the following:
What It Measures:
- Price-to-Earnings Ratio: Like the standard P/E ratio, it compares the market's price (e.g., the level of a stock index like the S&P 500) to its earnings per share (EPS).
- Cyclically Adjusted Earnings: Instead of using a single year's earnings, the Crestmont P/E uses a 10-year average of inflation-adjusted earnings (similar to the CAPE ratio by Robert Shiller). This smooths out short-term fluctuations in earnings due to economic cycles.
- Inflation Adjustment: Earnings are adjusted for inflation to ensure consistency over time, accounting for changes in purchasing power.
- Long-Term Perspective: By focusing on a decade of earnings, it aims to reduce the impact of temporary economic booms or busts, providing a clearer view of whether the market is overvalued, undervalued, or fairly priced.
We illustrate the recent market overvaluation via 3 charts produced by Crestmont Research. 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 (> 4 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% and 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 December 2025 the average of these 4 measures places the U.S. stock market (S&P 500 index) as being 175% above its long term geometric mean. This remains 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 December 2025 the average of these 4 measures places the U.S. stock market (S&P 500 index) as being 175% above its long term geometric mean. This remains 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 below its recent peak and is currently in the "Overvalued" zone (> 31.9% 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 historical real return of U.S. equities is +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 historical real return of U.S. equities is +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 December, 2025)
(Source: Research Affiliates)
(data as of 31 December, 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 developed market Small, Large Caps ex-US, Europe and Emerging market equities as providing the greatest equity returns over the next 10 years.
Data continues to point to developed market Small, Large Caps ex-US, Europe and Emerging market equities as providing the greatest equity returns over the next 10 years.
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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 2026 Composite Model
The Ned Davis Research S&P 500 Cycle Composite Model is a predictive graphic that blends historical patterns:
It averages daily S&P 500 data over many decades to project a "typical" path for the index in a given year — in this case, a forecast for 2026 (a mid-term election year).
Recent analyses (as of late 2025) describe the 2026 Cycle Composite as showing:
- The 1-year seasonal cycle
- The 4-year Presidential election cycle
- The 10-year decennial cycle
It averages daily S&P 500 data over many decades to project a "typical" path for the index in a given year — in this case, a forecast for 2026 (a mid-term election year).
Recent analyses (as of late 2025) describe the 2026 Cycle Composite as showing:
- A strong start to the year with a rally into mid-April
- Potential weakness or a pullback in the summer/early fall (around mid-term election volatility)
- A low point in October
- A strong recovery into a positive year-end finish
The levels are not as important as the general trends/turning points as indicated by the Composite model.
U.S. 4-Year Presidential Election Cycle
* 2026 is Year-2 ("2nd Presidential Year") of the 4-year cycle
Presidential Cycle S&P 500 returns (inc. dividends):
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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: 16.39% 2026-Year 2: TBA |
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):
