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Current Financial Market Signals - June 2018

Set out below is the latest colourful dashboard updated from 8 June 2018 by one of our research partners, Ineichen Research & Management (IR&M).

Observations In the IR&M dashboard, green is good, red is bad. Markets respond mostly to change. Changes vs last update are circled.

The key take outs from this month are:

  • Overall changes in this update were negatively biased. Over the past five updates the positive-negative change ratio was 25:58, i.e. a negative bias. From 68 regime tests in this update, 52 (76%) were positive, this remains unchanged from the last update.

  • The “US improving, Eurozone worsening” theme remains largely intact.

  • Economic, business, and consumer remains falling, generally. OECD leading indicators remain falling, falling consistently and sharply in Europe.

  • Emerging markets changes are largely negative and markets continue to worsen.

  • Globally, industrial production remains positive.

  • There were 6 notable changes to long-term equity price momentum; 4 were positive (World and European Industrials, UK Financials, and French Telecom), 2 were negative (Italian Financials and South Korean Industrials).

Table 1

A refresh on the columns

Looking at each of the factors, broadly from left to right, the first five columns set out IR&M’s interpretation of various recent economic data released in those counties and whether it is generally improving or deteriorating. The EPS change column in the middle is a very important indicator of whether profits estimates for the next year are rising or falling. The final three columns look at the momentum (or technicals) in the various global share markets.

Are there any Risks?

We’re back to April 2018 numbers with the sum of ticks falling back to 35, still well off the all-time high of 57 in January. It appears that Germany has experienced a negative change to overall momentum (long term price, economic and earnings).

May 2018 bottom line tally:

What about Australia?

According to Ineichen’s data, economic momentum in Australia remains unchanged with macro surprises continuing to be negative and earnings estimates not changing. Changes over the past four weeks were negatively biased. Consumer sentiment looks to have peaked in January 2018 and have been slowly falling since.

Table 2

Source: Ineichen Research & Management IR&M is one of several research sources that guide our investment decision making. They are Swiss based and provide a detailed global view of the many drivers of investment markets. Like us, they believe that in the long run investment returns are driven by the fundamentals (the prices today will ultimately revert to what various things fundamentally ought to be worth) but in the short term may be driven more by sentiment and momentum (otherwise known as “technical” signals).

Disclosure Statement: This communication has been approved and issued by Sovereign Wealth Partners Pty Ltd ABN 18 607 071 367 Corporate Authorised Representative (No. 001233909) of Bennelong Wealth Partners Pty Ltd ABN 44 164 127 833, AFSL 456235.

General Advice Warning: Any advice included in this article and associated links is general in nature and does not take into account your objectives, financial situation or needs. If a product we recommend has a Product Disclosure Statement (PDS), you should read it before making a decision. Past performance is not a reliable indicator of future performance. We do not endorse any information from research providers that we provide to you, unless we specifically say so.

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