Indicators points towards overweight in equities – for now

07.06.2016
The deceleration in US industrial production has now ended, and according to our models we are likely to be facing the greatest improvement in the growth of US industrial production for several years in the second half of 2016.
Momentum indicator says buy
The models’ prognosis for Europe’s development is significantly more subdued. On this basis we must expect that concerns about the European growth crisis will continue into 2016, although I am still more optimistic about the European economy than the majority of analysts.

Our MomVol indicator (which can assume values between 0 and 1, where values above 0.6 represents a "buy signal") is now back in the market, showing a value of 0.77 – up from last month's 0.44. The reason the indicator has risen so much in a month is because it screens global equity markets in local currencies, and these have risen significantly over the month. Many of these markets have been close to giving individual buying signals last month and have now crossed the “buy signal” threshold.
 
If we compare the MomVol indicator signal with the fact that our indicators of leading indicators are pointing upwards for the rest of the year, we should have a potent buy signal for stocks. In other words, there is a provisional basis for overweight over the summer.

Read the Monthly economic report here