Global equities can do little wrong lately, with falling volatility, improving earnings, and an almost straight-line upward march in the MSCI All-Country World Index. Yet, looking at my country breadth indicators there are a couple of concerning signals showing up.
The chart comes from a look at some of the latest macro and market developments in the latest weekly report in which we talked about the global synchronized economic recovery appearing to develop 'speed wobbles'.
The chart of the day shows 50-day moving average breadth across 70 countries, and aside from the clear case of bearish breadth divergence (rising index vs falling breadth), lately this indicator has fallen to the lowest point since the US election.
For clarity, the breadth indicator counts the proportion of the 70 countries we track which see price above their 50 day moving average. We also track 200-day moving average breadth, golden cross breadth, and 52-week New Highs minus New Lows and on all fronts breadth has been deteriorating lately.
This actually stands at odds with much of the macro data we track. At a global aggregate level business confidence is strong, consumer confidence remains buoyant, leading economic indicators look the best in a while, corporate earnings are improving, and even inflation is starting to stir.
Yet it's not just global equity market breadth, there's also the point that the US 10-year bond yield remains obstinately locked in a range despite the better macro data, and "Dr. Copper" has been hemming and hawing lately.
So my initial reaction is to call it 'speed wobbles' in that things broadly look alright from a cyclical standpoint, it's just there's a few early signs of potential trouble on the risk front. Like speed wobbles on a bicycle it can end up just being a temporary if concerning phenomenon, but it's certainly worth paying attention lest one ends up over the handle bars!