"Whites of their eyes"
(Published 19 Sep 2023)
There is evidence that price momentum in some risk assets is dissipating.
Some Leading Indicators and inverted yield curves are flying red flags about future economic growth.
However, history cautions against using leading indicators and inverted yield curves to pre-empt market events, as the lag can be very long.
Current valuations seem poor and implied volatility low given the flags and contracting credit metrics
The question now is whether investors sitting on material gains in consolidating markets will remain invested or decide to take profits, and if so, whether price support levels hold.
Time and focus will be well spent on monitoring price momentum for new negative trends, identifying any divergence signals and spotting price support breaks, especially in more leveraged economies.