Scores on Doors: commodities 13.5%, global stocks 11.3%, HY bonds 5.7%, IG bonds 2.6%, government bonds 0.5%, cash 0.4%, US dollar 0.0%; commodities off to their best start since 2005, US stocks their best start since 1991.
Flows this week: $6.5bn into bonds, $0.3bn into equities, $0.2bn out of gold; equity flows ($50.3bn redemptions) off to their worst start since 2016; BofAML Bull & Bear Indicator rises to 5.1 from 4.9, highest since May'18 (Chart 2), driven by credit inputs.
Fed ignites credit: inflows to IG/HY/EM debt past 8 weeks = $43bn, major reversal from $69bn of redemptions in these credit products in Nov/Dec (Chart 3).
Growth>value: biggest inflows to US stocks ($9.1bn) since Sept, tech ($1.3bn) since Jun; outflows in Europe ($4.1bn) & banks ($0.5bn); China lagging inflows to EM (Chart 4); equity buying is modest and exclusively in "growth" not "value".
You pause if you want to: rally has not led to Fed tightening as was expected (on the contrary, Fed talking "inflation targeting" to head off MMT); PBoC/ECB/BoJ ready & willing to ease; US (H0A0) & Euro (HE00) HY corporate bond returns back to highs, bond volatility MOVE index at lows (Chart 5); policy makers saying stay long risk.
Green shoots: Japan/EU recessionary but China new orders up 1st time in 9 months, US claims data still low; 5s30s US yield curve steepens 25bps past 3 months, China bond yields inflecting higher (Chart 6); we say position for Q1 global EPS expectations trough.
Markets for traders not investors: "green shoots" most powerful in secular bear markets (Europe & China today); in Japan between 1990 and 2003 there were 13 equity trading rallies that exceeded 20%, and seven trading rallies that exceeded 33%
Bucking the consensus: consensus is long corporate bonds not commodities or stocks; long defensive growth not cyclical value; long US & EM not Europe, China; long deflation not inflation; our favorite contrarian 2019 trade is long China production plays (Asia/EU industrials, banks, commodities), short US consumer play