The ETF Portfolio Strategist: 16 JUL 2023
Trend Watch: Global Markets & Portfolio Strategy Benchmarks
The trend couldn’t be any clearer.
Global markets continued to rally last week, lifting all of our strategy benchmarks. The G.B16 Index led the way with a strong 3.0% gain, pushing the benchmark to its highest close in well over a year. See this summary for design details on the strategy benchmarks and this summary for how the metrics in the tables below are calculated.
The strength of the current uptrend is conspicuous on multiple fronts, including our Signal score for the strategy benchmarks. All five indexes are posting Signal readings of 5, just one notch below the strongest-possible bull reading — 6.
It’s a precarious rally, for the by-now familiar reasons, including: ongoing efforts by central banks to tame slowing but still high inflation and concern in some circles that recession risk is still too high for comfort in the US and elsewhere. But markets disagree and are pricing in a better-than-expected future relative to what the macro pessimists are forecasting.
Markets can be wrong, of course, but given the strength and breadth of the current rally your editor expects G.B16 to retest its early 2022 high. The key question is whether markets would then continue to push higher, lifting G.B16 to a new record?
It’s too early to make that forecast with any confidence. Much will depend on how the macro data unfolds over the rest of the summer. But for the US, at least, the near-term outlook is still moderately positive, as I detailed in today’s issue of The US Business Cycle Risk Report.
Meanwhile, I expect that the bullish momentum of late will survive in the weeks ahead. There will be backing and filling, as always, but I see G.B16 recapturing its previous high at some point in the months ahead. At that point it will be time to review the critical question: Is this a bear market rally or the start of a new bull run?
Unclear at this point, at least to this observer, but either way it’s a reasonable bet that G.B16 and multi-asset-class benchmarks generally will remain on track to recover the lost ground of 2022. At that point, the real challenge in the forecasting game will commence. ■