US: Exposure to US Equity markets 100% / Cash 0% (unchanged)
Europe: Exposure to European Equity markets 100% / Cash 0% (vs 85% / 15%)
European markets surged dramatically yesterday, led by Banks, Oils and Tourism after Pfizer reported impressive phase 3 vaccine’s results showing more than 90% efficiency. This will have deep implications, restoring the economic activity to its full potential at the first place, lifting potentially the weakest sectors from multiyears lows, that could however take time. It may be too early to assess vaccine availability timetable and a global impact looks unlikely before at least H2-2021 but the outlook is significantly clearing up. The second effect which has already begun to materialize is heavy profit taking on typical « stay at home » stocks such as Zoom, or some e-business or cloud-software stocks. Another effect is the surge in US 10 year rates (0.93%), that may sooner than expected become a concern for investors, weighting negatively on Utilities and growth stocks and favor Banks. The rotation in process between Banks and Techs may however prove to be a short term and mainly one-time violent adjustment, as long as rates remain at low level and while the EPS cycle should remain in favor of the Tech-led business models. Our mapping shows a confirmed short term bullish reversal in Tourism, Banks and Media but not in Oils, neither in European Properties and Telecoms. However other sectors such as Automotive, Construction and Retail (ie. Inditex +14%) were also big winners of the yesterday trading session. These may be some segment to favor short term, waiting for the end of the « stay at home/Back to work » short term adjustement. Later on, Technology should resume its bullish trend while the weakest sectors will likely need a long time to go back to their pre-covid peak.
Our Market Pressure Index now stands at 47/100 (+3), into the "bullish"zone.
The market participation/density is positive. There is 46% (+4) of major bullish configurations for the Stoxx600 and 60% (+4) for the S&P500, while major bearish trend configurations are 23% (-17) for the Stoxx600 and 14% (-10) for the S&P500. Therefore the density analysis reflects a neutral momentum in Europe and a positive momentum in the US (spread now at +23 in Europe and +46 in the US). During risk-on/bullish market phases, the spread is expected to be > 30.