With both stocks and bonds posting solid gains in the early weeks of 2020, the question remains which group is giving a more accurate assessment of the current economic landscape. Is it stocks, who've largely abandoned concern over the coronavirus and global growth struggles in favor of central bank stimulus to drive prices higher, or is it bonds, who've indicated that investors are adding safe assets to their portfolios in preparation of a prolonged downturn?
Treasuries are firmly in the bullish camp as momentum signals are solid green across the board. Despite the recent rally, they don't look terribly overbought either, which could mean a move towards 1.5% on the 10-year note. More importantly, emerging markets bonds have reentered the picture demonstrating that the defensive asset buying is also spreading across the pond.
Equities aren't necessarily suggesting risk-off just yet, but the signals are decidedly mixed. Several of the more cyclical market sectors are indicating caution, including energy, materials and industrials, which has been trailing the S&P 500 steadily for a few weeks.
The dollar, gold and palladium are the only currencies/metals that are indicating strength. The dollar is back near multi-year highs as the coronavirus has investors fleeing global currencies. Gold is the precious metal of choice right now, although I maintain my stance that silver is the better value.
Here is the full scorecard for the week ahead.