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My Favorite Charts of 2018

Following on from our best and worst charts of 2018, the "2018 People's Choice Charts", and the "honorable mentions", finally here's a look at my favorite charts of 2018 (from our End of Year Special Report).

These are some of my favourites – mostly ones I simply enjoyed coming up with (some of my favourite moments are designing a new chart/indicator which brings a completely new perspective or insight). So check them out, and hopefully you find them interesting/insightful too!

Format note: each chart has a comment on the chart, the date when it first appeared, and a quote from the original report which it appeared in.

1. This chart showed US cyclicals vs defensives as once a source of strength for the S&P500, and then a source of risk.

(12 Jan 2018) “relative price performance looks very stretched, and both absolute and relative valuations look stretched. …this creates a vulnerability for correction risk given how key cyclicals have been in driving the new bull market.”

US cyclicals vs defensives and the S&P500

2. For all its faults, the “death cross” can be useful in identifying major market regime transitions. This one shows the picture for the ACWI and across countries.

(30 Nov 2018) “the so called “Death Cross” i.e. where the market in question’s 50-day moving average falls below the 200-day moving average… The point of this signal is to attempt to flag major turning points (down) i.e. to serve as a bear market warning indicator.”

GLobal equities death cross signal breadth

3. Cash money now: this chart shows the pace at which investors are increasing/decreasing cash allocations and as of November it is surging – importantly, this is coming off of record/cycle low portfolio allocations to cash.

(7 Dec 2018) “chart shows the YoY rate of change in cash allocations (a higher reading basically means investors are raising cash [although I do note that the market can drift allocations higher, but even then there’s still an active decision about whether to rebalance or not]). This indicator has reached the same level as in early 2016 when the market bottomed.”

4. SCANNZ (Sweden, Canada, Australia, Norway, New Zealand) – an odd lot of countries with some distinct commonalities; a key one being overvalued property markets.

(14 Apr 2018) “Aside from equities, as hinted at, there have been some pockets of particular overvaluation open up across global property markets. For example, US commercial property is looking stretched on a real price basis vs long term average. And as a reminder, I previously mentioned the “SCANNZ” economies and how their significantly overvalued property markets are vulnerable to the global turn in monetary policy – hopefully they don’t end up like that other bad acronym the PIIGS (but at least you can say you heard of the SCANNZ here first!)”

SCANNZ economies - overvalued housing markets

5. The reflation trade speculative futures positioning indicator – this one got to an extreme and then began to rollover, effectively giving advance warning of the global risk-off trade in Q4.

(22 June 2018) “the collapse in the economic surprise index must reflect previous excessive optimism. In a sense, this optimism can be seen still hanging in there in the “reflation trade positioning indicator”, which combines the signal of speculative futures positioning in crude oil, copper, US stock indexes, and treasuries & DXY (both inverted to be consistent with the overall signal).”

speculative futures positioning - reflatometer

6. Median sector valuations for EM flagged the expensiveness of EM equities early this year (same signal for median of countries).

(2 Feb 2018) “Taking another angle on EM equity valuations, …show the lay of the land in EM sector valuations (the charts show the upper/lower quartiles and median sectors – using a combined historical z-score of the trailing PE, forward PE, price to cash earnings, and price to book ratio). The median helps characterize the general trend and level (being less affected by outliers), and in this respect reinforces the conclusion that EM valuations are becoming lofty. The gap between the UQ and LQ also highlights the relative value angle (between sectors) again.”

EM equity valuations chart - sector views

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