WHAT CAN BE SAID ABOUT MARKETS NEARING THE END OF Q1 2019?

So far, 2019 is in line with what we were expecting at the beginning of the year. We reiterate we were more surprised with the selloff in December 2018 than the rally in 2019.

The two-month 10.5% (in USD) rally in 2019 was the third strongest start to a year on record. In March, we saw the first down week of 2019, yet the lack of follow through to the downside (down 2.5% following a 20% rally) shows how short positioned the market is. Bonds and stocks are rallying as the Federal Reserve (Fed) has moved to a pause stance. The US dollar is range bound and large equity market short positions that were established in December are still in the process of being squeezed back into the market which has caused an aggressive rally.

Key market data show that things are improving: China A-shares and Copper have both broken higher out of the ranges established across the last 6 months (Figure 1). It is often worth a check-up with Dr Copper. Copper’s heavy use in new homes, autos, and electronics tends to provide a forward-looking signal on the growth outlook.

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