I’ve been fairly cautious about global equity markets for some weeks now, slowly selling off some of my best investments and increasing cash. I’d even been buying some shorts on the market a few weeks back but pulled away from these as markets continued to power ahead. For now I have stayed away from obvious hedges but as every day passes I grow more cautious. I’m also constantly on alert for other signals that might indicate a market turn.
On this theme thought I would share with readers a nite just out from London based research house Cross Border Capital. This outfit tracks global liquidity flows and I find its analysis fascinating. I’m not entirely sure their analysis has great tactical efficacy but I tend to listen nevertheless.
Here’s their latest note: you have been warned!
Surge in investors’ risk appetite signals. possibility of a. market correction. The risk component of our Global Liquidity Indexes (GLI™) stands at 71.0. While overall risk conditions are moderately high, they diverge significantly at the country and regional levels. Among the major markets, the US and Japan. lie at the high-risk end of the spectrum, while the Eurozone. and the UK. are very low risk. Meanwhile, Emerging Market risk has risen to 63.7 from a low of 31.9 at end-2016. Globally, the recent rise in overall risk has been driven by a surge in investors’ risk appetite. This has propelled our exposure risk index to its highest level since October 2007. and signals the possibility of a market correction.