How to Spot Market Tops: Interest Rate Spreads

Over the past several days, we discussed 4 ways to identify market tops: macroeconomic indicators, interest rate raising cycles, valuation metrics and market sentiment. Here, on the 5th and last part of this series, we will analyse interest rate spreads and see what they tell us about the current market. 1. High Yield Spreads Rapidly rising[…]

How to Spot Market Tops: Valuation Metrics

In previous articles, we discussed several ways to identify market tops. We already covered macroeconomic indicators and interest rate cycles. Here we will analyse valuation metrics and see what they tell us about the current stock market. Markets usually peak when there are significant signs of overvaluation. 1. Total market cap relative to GDP If we[…]

How to Spot Market Tops: Interest Rates

In previous articles, we discussed ways to spot stock market peaks. Here, we will show how interest rate increases by central banks usually precede market crashes. More specifically, we look at the relationship between the “federal funds rate”, which is set by the US central bank, and the S&P 500. Typically, the central bank raises[…]

5 Signs of an Impending Crash

As Mark Twain famously said, even if history doesn’t repeat itself, it often rhymes. Admittedly, no two market tops are exactly alike, but they all have several elements in common. So, how do you spot impending market tops before they occur? To answer this question, our research team has conducted an analysis of economic conditions[…]

Australian business conditions rise to the highest level since the Global Financial Crisis

The latest NAB business survey was stronger than expected in March, revealing business confidence levels at decade highs. According to Mason Stevens research, the improvement was supported by positive changes in the services, mining and wholesale sectors, and was partly offset by an under-performing retail sector. Source: Mason Stevens Daily If we look at state data,[…]

Why large companies have outperformed in 2017

Since the start of the year, large cap stocks have outperformed small cap stocks in both the US and the Australian markets. In the US, the Russell 2000. an index of small companies, has underperformed the S&P 500 and the Nasdaq by 4% and 8%, respectively. In Australia, the MSCI Australian Small Cap index has underperformed the ASX 200 by 3%. Here’s why.

How attractive are Emerging Market Equities? A valuation perspective.

Ever since comparable index data became available in 1988, emerging market stocks have outperformed world stocks by more than 3% per year. Of course, this came at a cost of higher volatility, but even if we consider a closer time period, the payoff of investing in emerging markets has been significant. Source: MSCI But how[…]