Weekly Risk Signals

I’ve noted over the past few weeks that the signals were starting to trend negative. This week, two of them finally turned. Now that the tech trade is sputtering, we’re starting to see some major downside risks emerge. Gold, utilities and Treasuries remain the big story. The time for risk rotation strategies may finally be returning.

Risk-on manages to hang on for another week as equity market gains spread out to include cyclicals and small-caps, but not defensives. The bond market correction that has brought investor expectations on rates back in line with what the Fed has said in the past may need to go a little further. Lumber/gold is still relatively neutral, but the sharp move higher in gold this week could be meaningful.

The signals all remain risk-on for another week, but I’m actually growing more convinced that a risk-off event is coming in March. I see several signals indicating that conditions are much more neutral than risk-on. Given some of the recent trending, it could be just another week or two before multiple signals indicate risk-off, which would put us squarely in early March, the time frame that I’ve been pointing to for a while.