Over the last 20 days, the US equity is showing early signs of exhaustion, and momentum is beginning to weaken. In the following charts, we’ll highlight the various technical measures we calculate each day to illustrate the early turn in momentum. Our KLSU DM Americas Index represents the top 85% market-cap of the US and Canada.
With some exceptions, smaller-cap stocks in the US tend to pay higher taxes than their larger-cap peers. As such, speculation that corporate tax rates may be cut has stoked the performance of US small caps recently.
Employing basic bond math, we can decompose the US Treasury bond into two pieces: real rates and break-even inflation expectations. Because real rates (TIPS) and nominal rates (US Treasuries) are directly observable, break-even inflation is relatively easy to determine.
The Federal Reserve officially signaled the beginning of its balance sheet run-off. At this point, that’s old news. But, today the Fed released the Z.1 Flow of Funds, which adds to the intrigue of the balance sheet run-off. Why?
Knowledge Leaders Strategy mid-quarter update.
For retail investors, there are a few vehicles for exposure to gold. The SPDR Gold ETF (GLD) and the iShares Gold ETF (IAU) are the biggest, lowest cost funds for retail investors. Below are charts of the GLD and the IAU, with price and USD volume overlay to illustrate the liquidity.
Today gold is trading over $1,305, for the first time since November 4, 2016. The breakdown in the USD Index last week was a good signal telegraphing the short-term breakout in gold. Gold is notoriously difficult to value, but we have found one relationship that seems to consistently work.
On a relative basis, compared to the developed world, North American stocks peaked on November 23, 2016, and have since underperformed by about 4% (in USD).
As the title suggests, any way we slice the data, it appears that the crude oil market is coming into balance to a greater extent than is generally recognized. This has broad asset allocation implications.
Equity allocators should take note that performance trends in North America are deteriorating while they are picking up outside the US. In the table below, I show the recent performance of the sectors within our KLSU North America index...