Market phase: Normalization in process
USA: Exposure to US Equity markets 100% / Cash 0%
Europe: Exposure to European Equity markets 85% / Cash 15%
Jerome Powell boosted stock markets last week by committing to allow inflation to exceed temporarily the 2% threshold to balance periods of low inflation, which resulted in the surge of longer-term Treasury yields and sharply steepened the yield curve. This is a positive for Banks and a negative for Utilities and Properties in both the US and Europe that is expected to follow the same path sooner or later: European Banking sector rose by 3.9% last week while Utilities drop by -0.7% (Stoxx600: +1%).
Chinese blue chips index (CSI300) was up by 0.7% on Monday, reaching a 5 years peak, while the yuan/USD was on a 1 year peak after survey showed services jumping +1 point to 55.2 in a bullish sign for consumer demand. Some positive devlopments to be noted in the Europe sectoral mapping: while Healthcare momentum is fading, the Travels & Leisure sector including hotels and airlines is bouncing back short term (in absolute terms) in a sign of higher optimism on the outbreak management.
The same move is currently taking place in the US, with stocks such as Carnival (CCL) or Hilton (HLT). These are however so far short term move that need confirmation in both the bottum up side (including Enter Long signals in stocks part of the sector) as well as greater participation to the bullish momentum within the sector leading to a positive signal on the sector/ETF itself. To be monitored closely.
Our Market Pressure Index stands at 39/100 (=), into the "risk-on" zone.
The market participation/density is positive. There is 42% (=) of major bullish configurations for the Stoxx600 and 53% (+1) for the S&P500, while major bearish trend configurations are 38% (+1) for the Stoxx600 and 24% (-3) for the S&P500. Therefore the density analysis reflects a neutral to positive momentum in Europe and in the US (spread now at +4 in Europe and +29 in the US). During risk-on/bullish market phases, the spread is expected to be > 30.