Weekly Risk Signals

The data shows that the economy is definitely slowing, maybe even at an accelerated rate. Nothing changes in the signals this week. Utilities underperformed last week, but the uptrend doesn’t look like it’s broken just yet. Lumber remains the one commodity that is really tough to get a read on. I’m guessing that volatility is likely to remain elevated for a while.

I really think we’re entering the early stages of a strong risk-off phase. A number of things are looking like they could break here. With yields soaring, investors have almost been forced into staying in equities. I think once investors start getting more comfortable with the idea of making a broader move back into Treasuries for safety, things could really start to get ugly.

This is about the largest risk-off consensus we’ve seen in these risk signals since last year. The only holdout is Treasuries, but that’s because they’re not behaving like a risk-off asset at all. When we start to see a consensus in all of the signals as we are right now, that tends to be an outright warning. I don’t think this is the time to be cavalier about taking risks.