19 Feb IS A TRANSITION AT HAND?
Yesterday I referenced a Bloomberg wire story stating that during the last ten days the cross correlated trades that has been prevalent during the last 16 months is collapsing. Yesterday the trend appeared to be continuing. Is there a tectonic shift taking place in the market as momentum is now underperforming?
As widely discussed mega capitalized growth has outperformed value since 2010 with the largest capitalized momentum issues grossly outperforming everything by a 55 point margin during 2015.
Yesterday I referenced a JP Morgan study suggesting the last time value was as discounted as it is today was 1980. JP Morgan used the term “extreme premium” to describe the current relationship.
Many times I have opined the most basis tenant to make a sector to move higher is more buyers than sellers. If everyone owns something, who is left to buy when selling commences?
Is a major transition at hand? Unfortunately only history will state if one is indeed in its infancy.
Last night the foreign markets were down. London was down 0.56%, Paris down 0.97% and Frankfurt down 0.98%. China was down 2.87%, Japan down 1.42%and Hang Sang down 0.40%
The Dow should open nominally lower, partially the result of a small decline in oil. Today is options expiration day. Will volatility be accentuated or has positons already been closed out? I think the latter. The CPI is also released. Will it validate or nullify Wednesday’s PPI data which were considerably higher than the consensus estimate because of rents.
All must remember that OER or what someone thinks their house can be rented is about 30%-32% of inflationary indices. There is a diverse argument between the relationship of OER and rental rates—who leads what. A major reason why inflation is “well anchored” is because of OER which is still bumping along its bottom.
The 10-year is up 3/32 to yield 1.73%.