With a new rating of 2 on the resilience scale, the US 10y Treasury yield is moderately resilient and may resist further declines. The recent onset of the Exceptional Macro MRI may represent an inflection point in the longer-term trend for yields.
The US 10y Treasury Futures (TY1) is rated 1 based on the Macro MRI. It lost the Exceptional Macro MRI for the week of 9/2/2016. I expect the Micro MRI to be positive over the next week or so.
US high-yield bonds are rated 2, down from 3 the prior week. They are still moderately resilient. This shift was expected.
The analyses for each of these series is done independently of the others. Viewed together, they reinforce an image of interest rates trending higher from here, albeit slowly.
Developed Market Stocks
US industrial stocks, as represented by the Dow Jones Industrial Average is rated 1. It lost the Exceptional Macro MRI last week, which was a notable shift that signals a higher possibility of lower stock prices.
UK stocks continue to be rated 2 this week.
European stock prices have a new rating of 1, down from 2 the prior week.
Overall, commodity prices are resilient with a rating of 3. The S&P Goldman Sachs Commodity Index represents a basket of commodities, with a high weighting in crude oil. Crude oil (not shown in graphic) continues to have a rating of 3. Please note that crude is a volatile asset and can differ meaningfully week to week from the MRI ratings. Over longer time periods, however, the ratings result in profitable trades.
Gold has a rating of 2, or moderately resilient. There may be near-term price softness, but the Macro and Exceptional Macro MRIs continue to be positive, and prices are likely to be resilient mid-to-long term.
Emerging market stock and bond prices are rated moderately resilient. At the moment, this appears to be a temporary breather because the Macro and Exceptional Macro Market Resilience Indexes are both positive for stocks and bonds.
Chinese stocks, as represented by the Shanghai Composite, have a rating of 0, which suggests vulnerability to declines.
The Dollar index, DXY, is rated 0 and is vulnerable to declines. This is noteworthy considering concerns about rising interest rates in the US, which would typically lead to a stronger USD. We will be watching this conflicting signal.
The Euro is rated 2 this week, down from 3 the prior week. This shift was expected. EURUSD may continue to appreciate because of the positive Macro and Exceptional Macro ratings.
GBP is rated 2, which means it is moderately resilient. This is a new rating and suggests a positive shift – it was rated 0 just a month ago.