- US stocks this year risk ending their relative outperformance over global stocks, according to Bank of America Merrill Lynch.
- “The S&P 500 vs MSCI ACWI is a chart to watch for the rest of 2018,” Stephen Suttmeier, a technical analyst, said.
US stocks this year are at risk of ending their outperformance trend over global stocks, according to Bank of America Merrill Lynch.
The S&P 500, a benchmark of US stocks, has outperformed the MSCI All-Country World Index through most of the post-financial-crisis era. The index, however, “still shows signs of a 2-year+ top relative to MSCI ACWI,” Stephen Suttmeier, a BAML technical analyst, said in a note on Sunday.
Suttmeier identified over half a dozen technical S&P 500 indicators that are broken, signaling that the bullish trend is at risk of reversing. Chief among them is that the index fell below its 13, 26, and 40-week moving averages last week.
After attempting to crawl out of a 10% correction in early February, the S&P 500 stumbled as the US and China slapped tariffs on each other, raising fears of a trade war that would hurt the world’s two largest economies. Last week turned out to be the worst for the S&P 500 in more than two years.
But stocks made a comeback early Monday as these fears subsided, following reports over the weekend that the US and China quietly sought solutions.
“There is no relative breakdown for the US vs the world yet but the US is at risk to lose its leadership trend over global equities in 2018. At this point, the US is range-bound or neutral relative to ACWI — no top breakdown or bullish continuation signal yet. The S&P 500 vs MSCI ACWI is a chart to watch for the rest of 2018.”
The MSCI’s global benchmark in 2017 had its strongest year since 2009 with a gain of nearly 24%. Every national economy tracked by the Organization for Economic Cooperation and Development grew, a rare feat that was most recently seen eight years ago.
But cracks are showing in the global economy that could hurt stocks as well. These include slowdowns in euro-area and Japanese manufacturing, and downward revisions to US growth estimates for the first quarter.
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