Technical

Expectations of a deepening EM/China growth slump and RMB depreciation have been the key to the selloff in global risk assets. There is no basis for these expectations to improve. Therefore, there are few fundamental reasons for EM and global risk assets to rally much further. Stay put. In Brazil, the impeachment rally is unsustainable and will reverse sooner than later. Stay short Brazilian risk assets.

As confidence in the sustainability of corporate sector profitability declines, the multiple accorded to equities should recede. Ten reasons to stay underweight the tech sector. Initiate an overweight position in gold shares.

Over the coming two weeks, the G3 central banks will be holding key policy meetings that could prove instrumental in setting major FX trends for the next several months. What can currency traders expect?

For the month of February, the model underperformed both global and U.S. equities. For March, the model has modestly pared back its equity risk exposure, shifting the allocation into bonds. While Europe remains the largest equity overweight, EM and Canada also received some allocation. The U.S. and New Zealand were slightly downgraded. In the fixed-income space, the model is sticking with Italy and Spain.

Lean against rally attempts until leading profit indicators improve. The conditions for a tradable oilfield services rebound remain elusive. Capital markets may bounce, but we would sell on strength.

Greater safety for European taxpayers and bank depositors necessarily means more risk for bank equity and bond investors. We provide some detail, and also initiate two new short-term positions.

U.S. dollar softness may be sparking a subtle shift in sub-surface dynamics, to the benefit of select deep cyclical industries. Switch from rails into electrical equipment, and take profits in data processing.

Central bankers fail to grasp that in a non-linear world, it can be futile and dangerous to set an over-precise target for inflation. Today, European banks are the victims of such misguided linear-thinking.

The Fed backing off from rate hikes is a necessary but not sufficient step toward putting a floor under global risk assets. Equity market breadth measures are still very weak, suggesting the selloff remains broad-based. The bear market in commodities/EM/China will likely culminate in a credit event. Downgrade Mexican stocks from overweight to neutral within an EM equity portfolio.

Economic disappointment represents a serious obstacle for stocks. Stay with non-cyclical plays, including telecom services and health care. Upgrade the managed care group, and stay clear of banks, regardless of cheap valuations.