There still does not appear to be any serious challenge to the uptrend in equities, commodities, junk bonds and high yield currencies that began in mid March. The weakness in the USD is also supportive of a move into “high yield” assets. At this stage our concern lies with the strength in US Treasuries. Just how far this strength gets to over the short term is any bodies guess. However, we think that the ETF TLT will fall over again at the about the 97 level.
A number of commentators have been suggesting that the strength in many markets is a case of too far too fast, citing the massive move from mid March until the start of June. Yes from the low of March to the recent high at the start of June many markets have broken records for a 13 week period. However, if one was to add four more weeks on……i.e. a 17 week period (1st of Feb until 1st June) then markets do not look very overbought at all…….in fact if you go back until the start of the year then markets have gone absolutely no where (or if they have it is not enough worth mentioning). So, on a 12 month time frame markets are not in the slightest bit overbought.
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