Executive Summary – Download the Full Chartbook

Valuation data are mixed: equities appear cheap relative to current earnings forecasts, but expensive longer term. Higher interest rates represent a headwind for stocks, as “fair” value for the 10-year Treasury yield is closer to 4 per cent.

US economic growth is steady, but economic performance in both Europe and Japan is falling short of analysts’ expectations. China has posted positive results.

The US unemployment rate slipped below 4 per cent for the first time since 2000. Persistently high oil prices could eventually weigh on growth.

Liquidity indicators are tightening, particularly Japanese yen strength and US inflation expectations. Credit spreads are widening, though they remain far below historical norms. Nonetheless, rising interest rates will put pressure on corporate borrowers.

Investor sentiment moved back into neutral territory last month, as headline fatigue takes its toll on market conviction.

Technical conditions remain in “risk-on” mode, but technicals tend to be a lagging indicator. Our attention is focused on fundamental data, like crude oil, interest rates, the dollar, and credit conditions.

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