Macro Monitor
Risk Aversion Index Fell Sharply—New “Lower Risk” Signal
The dramatic turn-around in risk appetite triggered a new “Lower Risk” signal. It also marks the beginning of a very favorable seasonal window.
Interest Rates & Currencies: It’s Complicated
The recent sudden strength in the dollar is mostly attributable to the divergent central bank policies. This supports a bullish dollar outlook over the medium term.
Mid-Term Election – Favorable For Stocks
General patterns are a weaker dollar, rising stocks and range-bound bond yields.
Risk Aversion Index—Moved Up Again, Stayed On Higher Risk Signal
The hawkish Fed and various geopolitical risks weigh on market sentiment, so caution is highly recommended.
U.S. Bonds
U.S. Quality Corporate Bonds & Munis Rated Favorable; High Yield Bonds Rated Neutral.
Current State Of Stock-Bond Relationship = “Easing”
We define four states of the stock-bond relationship based on the directions of stock price and bond yield movements; stocks fear tightening more than true risks, while bonds are more responsive to Risk-On and Risk-Off.
Risk Aversion Index—Ticked Lower, Still On Higher Risk Signal
New ECB stimulus should support risky assets near term but caution is warranted.
Yield Curve Too Flat? Short Term Maybe, Longer Term Probably Not.
With the Fed policy approaching actual tightening, the market is trying to price in a rate hike in the next year or so. This is a rather typical market response.
A Year Before Tightening - Stocks Will Be Fine
We studied the five previous initial rate hikes and present the average pattern over the one year period prior to these events.
Risk Aversion Index Ticked Up - Still On “Higher Risk” Signal
There have been several cases in the last couple years where credit and/or currency risk-off events never affected equities. We will soon find out if this is just another one of those. Caution is recommended.
10-Year Yield: 250-280 Range Intact
As we expected, at 250-270, the 10-year yield stayed within our narrow target range in June.
Time Cycle Composite—Mid-Year Update
Our beginning-of-the-year message—“lower your expectations and be patient” has largely been true so far this year as most equity markets tracked the historical pattern pretty closely.
Risk Aversion Index - Stayed On Higher Risk Signal
The level of this index is in an extreme zone where false alarms are more likely as small movements in the index can trigger new signals.
10-Year Yield: Back in 250-280 Range
In the very short term, excessive bearish positions have been reversed so there is less downside pressure on interest rates. Over the intermediate term, incredibly low yields in the Euro-zone help cap the U.S. yield.
Credit Conditions Still Good But Less-Easy Than Pre-Taper
With the Taper underway and the back-up in interest rates over the last year, credit conditions have become less-easy for some consumers and small businesses.
Risk Aversion Index - New Higher Risk Signal
Surprising strength in the Yen, a drop in commodities, and slightly wider credit spreads pushed up the index. An increase in risk aversion becomes more likely at the current extremely low level. Caution is warranted.
Perception for the Professional
March 2026 Issue
Featured Articles
Sector Navigator
March 2026 Issue
