Same Market - Different Day

Risk Model: 5 - Beta Up!

Now that the French election drama is effectively over, the copper/gold ratio and VIX components have both turned to beta-up mode.

Unfortunately the herd has moved back into the Growth stocks and left Value stocks to meander aimlessly.

The chart above shows how far the "reflation" trade has unravelled. The Russell value etf has tanked relative to growth.

Weaker consumer data, oil price weakness and policy uncertainty have created a narrow rally focussed on large-cap tech stocks. This is not a healthy situation as it pushes the ETF herd to continue to chase the overvalued but winning trade. The broader market is stalled as this plays out.

A true, lasting leadership change to the cyclical trade remains elusive. Watch the Copper/Gold, Oil and Yield curve steepness for clues. For now I'm not willing to fight the tape but would rather hold some dry powder for the next reflation trade to develop.