BMO's Mark Steele is a man of few words, preferring pictures to make his points... but they matter:
Let’s just keep it simple. When bank risk breaks to the upside, it’s bad for equities...
European bank risk is breaking out...
which has arrested the pullback in U.S. bank risk - which is now soaring...
And that bodes ill for global stocks...
Stocks have had a nice counter-trend rebound on the back of a counter-trend rebound (from deeply oversold) in the price of oil. That rebound is also fading, with WTI eyeing the $30 mark once again.
We believe portfolios should be structured towards what the market rewards in this environment:
- As our relative strength breadth heat map points out, that appears to be Utilities and Staples, with a great divide between those sectors and anything else.
- Equities aside, treasuries look great.
Something systemic this way comes.