Cheap asset classes include: Dow, Eurozone Financials, US Banks, Hi-Beta, EuroStoxx 50, Emerging Markets, Eurozone Far-East & Australasia, Transports, writes Ziad Jasani this week.

View my Market Strategy Session

chart 1

Recorded: 11:15 am, July 5, 2018,
Duration: 1:10:58.

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Global Risk Sentiment

In the chart, looking at the third column to the right we see a comparison of higher risk asset classes and defensive asset classes back to the S&P 500 (SPY) on an annual basis.

Comparison to the S&P 500 creates a “risk-ladder” where market risk is considered neutral.

When we see more green above the SPY line (middle line) and more red below we have a general risk-on signal; and vice-versa - red above, green below would be risk-off.

Currently, higher-risk asset classes are polarized. Some very expensive and most very cheap, indicative of the current geopolitical and tariff trade war issues.

Cheap: Dow, Eurozone Financials, US Banks, Hi-Beta, EuroStoxx 50, Emerging Markets, Eurozone Far-East & Australasia, Transports.

Expensive: Nasdaq, Russell 2000, RSP, TSX, S&P 500, while Defensive asset classes present as very expensive.

For equities to advance, the USD must soften up. Overall, our Global risk-on throughout the week.

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