/perspectives/global-cio-outlook/a-more-mature-bull-market

A More Mature Bull Market

One of the characteristics of a more mature bull market, such as the one we are in today, is that asset prices become more susceptible to contractions due to negative news.

  Subscribe      Follow Guggenheim

March 26, 2013    |    By Scott Minerd

Global CIO Commentary by Scott Minerd

Asset valuations are becoming more extended, making risk assets such as equities and below investment grade debt vulnerable to a near-term setback. For the past five years, risk assets were fundamentally cheap, providing a cushion against market noise and periodic setbacks. We are transitioning into a period, though, in which bargains are much harder to come by in many of the major asset classes. High yield debt and corporate bonds, in particular, appear overbought at current levels. Although these markets are not exhibiting signs of a bubble, stretched valuations make these asset classes more sensitive to bad news. Despite the favorable longer-term economic outlook, investors should be prepared for the type of price volatility which is characteristic of more mature bull markets.

A State of Complacency

The Citi Macro Risk Index, calculated based on credit spreads, swap spreads, and implied volatility on major asset classes, is often used to measure risk aversion in global financial markets. This index has tracked closely with the S&P 500 over the past few years, however, the correlation broke down in January of this year. Despite an increasing level of macro risk driven by uncertainties in the eurozone, U.S. equity indices continue to climb to new highs.

S&P 500 INDEX VS. CITI MACRO RISK INDEX

Source: Citigroup, Bloomberg, Guggenheim Investments. Data as of 3/22/2013.

Economic Data Releases

Continued Strengthening in U.S. Housing Data

  • Existing home sales in February reached an annual pace of 4.98 million, the fastest in more than three years.
  • The S&P/Case-Shiller 20 city home price index was up 8.08% from a year earlier in January, the best result since June 2006.
  • New home sales fell 4.6% to an annual pace of 411,000, making January and February the best back-to-back months of sales since 2008.
  • Durable goods orders jumped 5.7% in February from January, with aircrafts comprising most of the gain. Orders excluding transportation fell 0.5%, after a 2.9% gain last month.
  • First time unemployment claims rose less than forecast to 336,000, keeping the four-week moving average at a five-year low.
  • Regional Fed indices were generally positive, with the Philadelphia Fed rising more than forecast. The Richmond Fed index had an unexpected decrease.
  • Leading indicators were up 0.5% in February, with eight out of 10 components contributing to the gain.
  • Consumer confidence, measured by the Conference Board index, fell in March to the lowest since November 2011.

Weak PMIs and Sentiment in the Eurozone

  • Eurozone composite PMI fell in the March advance reading, with both manufacturing and services showing an accelerated contraction.
  • Eurozone consumer confidence ticked up in the March advance reading, from -23.6 to -23.5.
  • German advance PMIs were weak, with a contraction in manufacturing activity and a weaker expansion in services.
  • The German IFO business climate indicator dropped to 106.7 after four months of increases.
  • Both the manufacturing and services PMIs in France were lower than forecast, showing no improvement in the pace of contraction.
  • Italian consumer confidence reached the lowest level on record in March, 85.5.
  • U.K. retail sales excluding auto fuel climbed 1.9% in February, the best one-month gain in nearly two years.
  • The HSBC China flash manufacturing PMI was better than expected for March at 51.7 versus 50.4 in February.

FEATURED PERSPECTIVES

September 15, 2023

Third Quarter 2023 Quarterly Macro Themes

Research spotlight on what’s next.

August 22, 2023

Corporate Credit Quarterly Insights - August 2023

Market and portfolio update from our Corporate Credit team

August 21, 2023

Third Quarter 2023 Fixed-Income Sector Views

Technical tailwinds support the market.

VIDEOS AND PODCASTS

2022’s Upside: The Fed Has Put the Income Back in Fixed Income 

2022’s Upside: The Fed Has Put the Income Back in Fixed Income

Anne Walsh, Chief Investment Officer for Fixed Income at Guggenheim Investments, joined Asset TV to discuss macroeconomic conditions, risk, and relative value in the bond market.

Macro Markets Podcast 

Macro Markets Podcast Episode 26: Mortgage-Backed Securities, Structured Credit, Market Liquidity

Karthik Narayanan, Head of Securitized for Guggenheim Investments, discusses value in the residential mortgage-backed securities market and other ABS sectors. Anne Walsh, Chief Investment Officer for Fixed Income, answers a listener question on liquidity. Jerry Cai, an economist in our Macroeconomic and Investment Research Group, brings the latest on the labor picture and an update on China.




Subscribe to Our Perspectives
 
PRIVACY POLICY
BUSINESS CONTINUITY
LEGAL INFORMATION

Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objective, risks charges, expenses and the other information, which should be considered carefully before investing. To obtain a prospectus and summary prospectus (if available) click here or call 800.820.0888.

Investing involves risk, including the possible loss of principal.

Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Corporate Funding, LLC, Guggenheim Partners Advisors, LLC, Guggenheim Partners Europe Limited, Guggenheim Partners Japan Limited, GS GAMMA Advisors, LLC, and Guggenheim Partners India Management. Securities offered through Guggenheim Funds Distributors, LLC.

© Guggenheim Investments. All rights reserved.

Research our firm with FINRA Broker Check.

• Not FDIC Insured • No Bank Guarantee • May Lose Value

This website is directed to and intended for use by citizens or residents of the United States of America only. The material provided on this website is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation. Investing involves risk, including the possible loss of principal.