This continuous theme of the equity market remaining relentlessly bullish while the bond market stays in defensive mode is back to creating the mixed signals that have made developing longer-term expectations more challenging.

Emerging markets continue their recent fade relative to U.S. equities, but we can see from the chart above that the largest underperformance is being reserved for EM small-caps. In particular, Latin America is looking weak, which can be viewed as a reflection of its COVID response and political tensions within the region. Brazil is looking like a mess.

European currencies continue to outperform those from the rest of the world. A better than expected jobs market is pushing the pound sterling higher, while an improvement in German investor confidence readings is helping to pull the entire region’s currencies higher.