Job cuts and falling sentiment
While various U.S. economic gauges continue to improve, the media is still filled with stories about job cuts. A quick scroll through Google News:
Thusfar we've seen an interesting dichotomy. Stocks continue to hover near all-time highs (the recent pullback pales in comparison with the massive rally), while Main Street is still hurting. The # of news stories with "job cuts" remains elevated.
A 6 month average of this figure is at the highest level since the GFC.
A historical sample size of n=1 shows that "the last time this happened, the S&P fell further in the coming months before staging a massive bull market rally". I wouldn't put much weight on n=1.
Sentiment around the world is falling after a multi-month rally. Australia Optix's 10 dma has fallen to 33.
When this happened in the past while EWA was above its 200 dma, EWA's forward returns were mostly a coin toss:
France Optix's 10 dma has fallen to 30.
When this happened in the past while EWQ was above its 200 dma, French equities' forward returns over the next few months were significantly more bullish than random:
Brazil Optix's 10 dma has fallen to 28.
When this happened in the past while EWZ was below its 200 dma, EWZ's forward returns were mostly 50/50:
Italy Optix's 10 dma has fallen to 29.
When this happened in the past while EWI was below its 200 dma, EWI's forward returns were mostly 50/50:
And lastly, Spain Optix's 10 dma has fallen to 30.
This led to mixed forward returns going forward.
Overall, sentiment has not yet fallen to a point that's consistently bullish for global equity markets. We still have some ways to go.