To The Moon

The Credit Market & the Stock Market are in agreement……and being competing claims in the capital structure — that seems like an unlikely set of words. But the reality is both equity and credit investors have bid their respective asset valuations rare heights.The chart below shows both Credit Spreads + Stockmarket Valuations are more than 1 Standard Deviation expensive.If you eyeball the chart it becomes pretty obvious pretty quickly what that means.You don’t see many readings at that level, and whenever you do it’s either late in the cycle or just before something bad happens.Being a contrarian indicator, when valuations reach extremes it tells you everyone is thinking the same. That means there are not many more minds left to join that consensus and add to buying flows, but in contras

Asset Class Performance Rankings 2024Heading into year-end, Gold $Gold - main 2502(GCmain)$ and the $.SPX(.SPX)$ are neck and neck for top spot.There’s still 11 trading days left (as of the time of writing), and anything could happen, but certainly for now 2024 has so far been a very good year for gold and a relatively lackluster year for most other assets. (source)China — Gold vs US Treasury HoldingsThis chart from OMFIF’s 2025-26 Perspectives pack shows China’s steady move to rebalance out of treasuries and into gold. The same trend has been echoed across BRICS+ with a steady rise in gold reserves vs steady decline in US treasury holdings. The key drivers of this have been geopolitics (e.g. sanction

Learnings and conclusions from this week’s charts: $.SPX(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $.IXIC(.IXIC)$ $Invesco QQQ(QQQ)$ $NASDAQ 100(NDX)$ $.DJI(.DJI)$ $GLOBAL X DOW 30® COVERED CALL ETF(DJIA)$ Seeing further signs of bullish euphoria.Stocks are trading to the non-recession-rate-cut script.The current type of bull market is statistically close to maturity.Household debt-to-asset ratios have massively deleveraged.The realized equity risk premium looks stretched (late-cycle).Overall, it’

Weekly Macro Themes Report - 13 December 20241. Stocks vs Bonds: Bearish stocks vs bonds given valuations, technicals, macro. Also mindful of the favorable setup for commodities vs stocks (commodities likely win in resurgence, vs bonds recession).2. Credit Spreads: Remain cautious on credit spreads given expensive valuations, wider complacency on risk pricing, and mixed macro signals.3. Tech Stocks: Booming earnings have helped tech stocks break numerous records, and sees them trading at a significant premium vs history, vs non-tech stocks, and vs global TMT stocks.4. Global vs US Equities: The new extreme relative value gap in global vs US stocks is compelling, but we need to see relative earnings and/or the US dollar turn to see price sustainably turn.5. US Dollar (+The US Premium): Rema

In case you were curious, I thought I would also include the same prospective equity risk premium indicator for developed markets and emerging markets (using their own government bond expected returns in place of treasuries).As you can see, it is a starkly different story for EM & DM vs US.The rest of the world is basically sitting there with a decent positive expected equity risk premium, while the US is sitting there deep in the negatives. This reflects higher expected returns for global ex-US equities (vs small negative for US), which in large part is driven by valuations.I covered the detail behind this in a previous edition: “Chart of the Week - What to Expect“ — and n.b. for reference, the Capital Market Assumptions dataset is a key feature in our monthly Market Cycle Guidebook (

The “equity risk premium” is the compensation investors receive *over and above the risk free rate* for taking on equity risk.Over the long-run the performance gap between US stocks vs treasuries has tracked around 5%. Stocks have a well-established long-term track record of beating bonds.And with an annualized performance gap of 12% over the past decade, investors have earned a pretty good premium for taking on equity risk in recent years.But it’s not always positive, and there have been times when this spread goes to zero or even negative (e.g. the trailing 10-year annualized return spread in March 2009 was -10% following the financial crisis shock to stocks and flight to bonds).As investors we need to think not just about chasing the best return —but also be mindful about risk & opp

China is back in the market, Central bank buying into 2025, Gold vs Bond market echoes, and Work required to buy gold...China is BackThe People’s Bank of China is back in the gold market: "the decision to increase gold holdings, particularly following Trump's recent election victory, reflects the PBOC's proactive approach to safeguarding economic stability amid evolving global conditions," It also comes as China’s main economic policy working group held a key meeting where they flagged a more aggressive easing stance heading into 2025 (changing the Monetary Policy stance to “Moderately Loose“ — the last time they used this term to describe policy settings was in 2008, so it does mark a significant change). $Gold - main 2502(GCmain)$ The Next S

The monthly Market Cycle Guidebook is a key resource for investors — providing insight into the stage of the business cycle, monetary policy trends, leading indicators, earnings momentum, valuations across multiple different assets and markets, long-term return expectations, and tactical asset allocation views.Key Findings from the Latest Monthly pack:Global monetary policy settings are increasingly shifting from headwind to tailwind as inflation falls and economic cycle data remain soft.Among the asset classes most at risk given valuations and the stage of the cycle are US tech stocks, US dollar, and corporate credit.​​Areas which see superior upside risk/reward meanwhile include government bonds, commodities, emerging markets, and certain sectors on a tactical basis such as defensives, s

Learnings and conclusions from this week’s charts: $.SPX(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $Invesco QQQ(QQQ)$ $NASDAQ 100(NDX)$ $.DJI(.DJI)$ $Gold - main 2502(GCmain)$ Seeing more and more signs of stretched sentiment.The Gold vs Stocks ratio may be nearing a turning point.Commodities vs Bonds hold key clues on the macro outlook.US stocks have exponentially dominated vs European stocks.US stockmarket valuations reflect supreme confidence.Overall, it seems like a case of another week, another set of charts showing more and more s

In this case looking at absolute valuations rather than relative valuations, and the combined absolute value score for all three flavorsThree interesting things standout to me: 1. US Large Growth is in extreme expensive territory, the last time it reached this level was during the late-stages of the dot com bubble, and more recently at the peak of the pandemic stimulus frenzy. Risk managers take note! 2. Global ex-US Small Value (GSV) is playing catch-up — this is positive because you can get bullish or bearish rotations (and glad vs sad relative performance). So far this is looking bullish... but to explain: A. Bullish vs Bearish Rotation: bullish rotation is where one plays catch up to the other thing, and helps drive the index higher. Bearish rotation is when the previous leader falls a