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My Best Charts of 2020

Earlier this year I went through my Top 10 Charts to Watch in 2021, but I thought it would also be good to share some of my charts and calls that worked particularly well last year (and don't worry, I will be sharing my worst charts next week... there are always two sides to the coin!!).


The charts listed below were particularly helpful in arriving at some of my key calls and recommendations for clients last year. I often find that while I do tell the story around the charts and build the puzzle up with multiple pieces, in many cases a good chart can speak for itself and actually do most of the heavy lifting in the investment thesis.


It's also a good exercise to go through - to see what worked well. It's fairly conventional wisdom to try and learn from failures, but it's also important to learn from success (albeit while being mindful of hubris and the need to stay humble).


With that all said, here they are! Hope you find it interesting...


n.b. I have updated them with the latest data (in a few cases the original idea has actually come entirely full-circle). Also on formatting: the italic text is a quote from the report in which the chart originally appeared.

1. Global Monetary Policy: It quickly became obvious as the pandemic began to unfold that a second global wave of monetary policy easing was on the way:

“The global policy pivot was one of my key themes in 2019, and it proved instrumental in a number of key calls, and was starting to take hold with a number of confidence/activity indicators starting to recover. As we know this has been complicated, and with that complication has come a new wave of easing call it the policy pivot part II [PP 2]. Obviously, the Fed emergency cut is the big one, but it adds to a total 21 rate cuts this year 71 last year), and with likely more to come.” (6 mar 2020)



2. Global Equity Valuations: Along with that wave of truly historic global monetary (and fiscal) policy easing, sentiment had collapsed, and valuations returned to 2009 levels, prompting me to point out the generational buying opportunity that it plainly represented.

“the median PE 10 ratio has dropped to the lowest level since the financial crisis. Although we could argue about what counts as “cheap” we can at least say there has been a spike in the number of countries whose PE 10 is below the 15 x mark. So, at this point it is true that we can debate the impact (duration/magnitude) of the pandemic, but one piece of factual information is that global equities have moved to extremely cheap levels, and represent compelling value (*the usual caveat that cheap can get cheaper applies).” (13 Mar 2020)


3. Emerging Markets Sentiment: As noted, sentiment had collapsed, and a key example was emerging markets. This was one of those times where an extreme reading in investor sentiment provided important and actionable contrarian information. Interestingly, we now find ourselves back at the top end of the range.

“investor sentiment on Emerging Markets has completely flipped from heightened optimism to extreme pessimism (which is a contrarian bullish signal). On the technicals, EM equities have begun to rebound after market breadth collapsed to washed out levels, which in the context of the sentiment + policy + valuations picture is a positive sign.” (10 Apr 2020)



4. Frontier Market Equities: Aside from emerging markets, Frontier Markets also began to look particularly interesting. Along with solid technicals, they had also begun to look attractive from a valuation standpoint, and with a number of very interesting strategic features – which I had been adding further colour on through the year, and continue to work on developing the research.

“market breadth has collapsed for frontier markets, with the 52-week new highs minus new lows indicator dropping to 2009 levels, and 200dma breadth likewise falling to oversold levels. Notably the MSCI Frontier Markets index (in local currency terms) is starting to stabilize at a key technical level.” (10 Apr 2020)


5. Commodities: Closely related, commodities had collapsed, and were teetering on a key decade+ support line. Breadth was washed out, valuations cheap, and sentiment shaken significantly. Thus, from my point of view it ticked all the boxes for a high conviction bullish medium-term position.

“some of the tactical indicators are looking interesting: breadth is washed out, commodity volatility has moved far beyond 08, positioning has come down a lot (both in the surveys and futures positioning data), and the GSCI light energy is holding support (for now).” (13 Mar 2020)



6. Industrial Metals: Well, this one could easily have made it into the ones that didn’t work, because I featured it back in January – thus it was initially wrong, but ultimately became more compelling as EM central banks ventured into QE, and indeed was ultimately right...

“historically there is a tendency for EM monetary easing to lead industrial metal price returns” (first featured on 17 Jan 2020)

“The substantial policy easing both late last year and again this year with the pandemic policy response has injected a lot of potential energy for metals. I would note in passing, that while China has been doing some easing, it’s the rest of emerging markets which have been doing the heavy lifting on the stimulus front” (19 June 2020)


7. US Dollar Volatility: What a wild ride for the US dollar. I began last year with a bearish view on the US dollar given the technicals, progression of longer-term cycles, valuation, positioning, and policy picture. I had my conviction tested during the peak of the panic when the DXY made a false upside breakout, but stuck to it. The interesting thing on this chart is it basically nailed the turning point… certainly one to keep an eye on in the future!

“…also note the implied volatility chart: volatility compressions have been seen prior to both bullish and bearish moves),” (17 Jan 2020)



8. Gold ETF Flows: Gold was also very interesting. I’m a perma-pragmatist when it comes to gold (in a space of many "true believers"). I believe the best thing to do is focus on the cyclical/tactical view rather than a structural view or belief. I basically went with the breakout, and extended the view to bullish gold miners. Interestingly though I decided to flip to bearish in early October as the tactical indicators flipped to excess optimism, and the technicals turned.

“gold has a couple of short-term signals looking interesting. At the time of writing gold has managed to hold onto the break above 1550 (with a couple of false starts at heading higher in attempt at clearing the key 1600 mark). Gold ETF flows have fully reset from excess optimism to slightly negative,” (24 jan 2020)


9. Global Sovereign Bonds: These last two are about a couple of tactical views headed into the crash. I would say I was perhaps too optimistic on the core views, but at least managed to catch the short-term bullish indicators for treasuries when yields were back above the 1% mark. I didn’t pound the table on it, but I did at least flag it as a possibility.

“short term there are a couple of tactical indicators giving bullish signals for bonds. For example, global sovereign bond breadth has rolled over from oversold levels,” (24 jan 2020)



10. Emerging Market Equities: Again, while I held onto my core bullish medium-term view for emerging market equities, I managed to flag a couple of emerging tactical risk signals, such as the one in this chart (as well as bearish divergence on the S&P500 and EMFX). But I do admit I never imagined how fast and furious it would ultimately unfold!

Also of note, right now a couple of fresh risk flags are waving for EM equities.

“note the bearish breadth divergence signal in emerging market equities, where in local currency terms the MSCI EM index made a higher high (note the green line) but the 200dma country breadth indicator made a lower high. This kind of pattern can help in flagging turning points so while I remain bullish medium term on EM equities, it’s not one to take lightly from a risk management standpoint” (14 Feb 2020)




Thanks for reading!


This is an excerpt from my 2020 End of Year Special report - click through to check out the report (and while you're at it be sure to sign up for a trial of my research service!).

Best regards

Callum Thomas

Head of Research and Founder of Topdown Charts


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