With the market having recovered significantly from its October lows, but not having reached new highs, sentiment is stuck in the neutral. With the NAAIM sentiment index at 36, the AAII bull ratio at 54 and the II bull ratio at 60, no major sentiment survey is showing marked optimism or pessimism. Unfortunately, with market participants noncommittal about the market’s prospects, there is little to be gleaned from contrarian sentiment analysis right now.
Below, we’ve created a table showing the performance of the different country ETFs.
Over the last month the best performing country has been Thailand, followed by Argentina, both with small gains. The worst performing stock market has been Russia, with losses of nearly 15%. Looking at the one year performance numbers, New Zealand saw the best performance, quickly followed by that of the U.S. The worst showings came from Egypt and Vietnam, both with nearly 50% drops.
The market may be rising, but at least one indicator is sending a strong warning signal. The TED spread, rather than declining as the market rose since the beginning of October, has continued to climb steadily higher.
While some may write this off as only one single indicator sending a negative signal, we think that there are strong grounds to pay attention to the TED spread. The risk to the world economy from European government debt problems is largely a function of whether the large banks that have exposure to the risky debt fail. The TED spread, showing the difference between what rate banks are lending to each other and the short term treasury bill rate, is a good proxy for the tensions in the credit markets. If the TED spread is rising, than we can see that banks are becoming increasingly reluctant to lend to each other.
This is an update to our commodity roll yield and momentum strategy. Since the last update, the top five ranked commodities, as measured by their respective ETFs, lost 2.9%, while the bottom five ranked commodities lost 3.6%. That’s not a big difference in performance, but obviously, a strategy doesn’t perform well each month.
Following the FOMC announcement, long term treasuries took off. The iShares Barclays 20 + Treasury Bond Fund (TLT) ended the day with a gain of 3.31%, putting it 5th on the short list of days with 3%+ rises. Below we’ve highlighted the one week performance of TLT following such instances.
