Should equity investors take profits?
Wednesday, May 15, 2013 at 12:56PM
Simon Ward

The indicators followed here were giving a positive signal for equities and other risk assets in late summer 2012:

The current message from the same indicators is more ambiguous:

The judgement here, therefore, is that a reduction in exposure to equities and other risk assets is warranted currently and a shift to defence should be considered if the real money / output growth gap closes.

The global double-lead indicator fell further in March and is starting to diverge negatively from real money expansion – see chart. Real money has led recent industrial cycle turning points by an average of six months; the indicator has led by five months. The forecasting approach here places greater weight on monetary trends but both measures suggest that the acceleration phase of the cycle – during which equities typically do best – is ending.

Article originally appeared on Money Moves Markets (https://moneymovesmarkets.com/).
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