In addition to following price levels of the major stock indices, we like to look at various measures of stock market breadth to get a feeling for the level of broad participation in rallies or declines.
New monetary policies like QE have muddied the water somewhat when looking at monetary aggregates like M2. We have a simple adjustment we make to M2 to improve the optics on bank credit.
One of the statistics that we like to look at to understand investor enthusiasm for a given sector is the percentage of stocks that are trading above their respective moving average over a variety of time slices (50-Day, 100-Day, 200-Day).
Over the last year, between the FRB and commercial banks, around $500 billion in net new real estate credit has been extended. That is the good news. The concerning part is that the FRB has accounted for over 100% of all real estate credit created.
The US Dollar (USD) has turned against the Euro…check. It has turned against the GBP…check. It has turned against the Yen…check. It has turned against the Swiss franc…check. And, lastly it has turned against gold…check.
The BOJ balance sheet has increased some 39% over the last year and the monetary base has increased about 46%. But, like in the US, the Japanese banks have just been parking their excess reserves right back at the BOJ.
Over the next 4 years, the Energy sector has the highest hurdle to clear in terms of growth expectations of any sector in the MSCI North American index. Looking back at the past 10 years, the double-digit sales growth expectation seems feasible.
Inflation in the Spain and Italy is plunging at rates reminiscent of 2008-2009. From StreetAccount:Draghi says ECB guidance allows rate cuts on volatility: Bloomberg cited comments from ECB President Draghi, who said that the central bank’s pledge to maintain rates at low levels explicitly allows for cuts in lending costs if market volatility resumes.
Over the last three months, the ”beta trade” has been on. We slice all 1,600 companies in the MSCI World index into deciles from lowest beta to highest, and then we measure the performance of each decile.
While all major European markets are currently positive so far this year, equity performance has been led by Greece, Ireland, and Spain: