Category: Countries & Regions

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US Market Snapshot

Bull/Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates whether the market is in a bull or bear phase, and the indicator on the right reflects the current valuation of the stock market. Stock market pricing indicates whether stocks are cheap or expensive in relation to earnings, but it is a poor indicator of market timing. We do not recommend selling stocks because market valuations are high; however, we recommend exercising caution when adding new positions.

Bull/Bear Market

The Bull/Bear indicator remains at 40%, warning of a bear market ahead, with three of five indicators signaling risk-off.

US Bull-Bear Market Indicator

University of Michigan’s Index of Current Economic Conditions remains near its record low, warning of a recession.

University of Michigan: Current Economic Conditions

However, the Chicago Fed National Financial Conditions Index has yet to confirm the bear signal. Financial conditions tightened to -0.475 on March 20; a rise above -0.40 would confirm the risk-off signal.

Chicago Fed National Financial Conditions Index

Stock Pricing

Stock pricing eased slightly to 92.26 percent from 92.37 percent last week. The steep change from 98.64 three weeks ago is partly attributable to a break in the series. We replaced the S&P 500 Price-to-Sales ratio and Forward Price-Earnings Ratio with similar series for the Dow Jones Industrial Index. There is one notable difference: we use a 20% trimmed mean, which excludes the top 10% and bottom 10% of readings for individual stocks, to minimize distortion from outliers in the smaller population of 30 stocks. The reading remains extreme, warning of a significant drawdown.

US Stock Market Value Indicator

We use z-scores to measure each indicator’s current position relative to its historical data, with results expressed in standard deviations from the mean. We then calculate an average of the five readings and convert that to a percentile. The higher the stock market price measure is relative to the historical mean, the greater the risk of a sharp drawdown.

The S&P 500 PE, measured against the highest trailing earnings, retreated sharply as equity markets shifted to risk-off.

S&P 500 PE of Highest Trailing Earnings

Robert Shiller’s long-term CAPE index has also retreated. CAPE compares the current S&P 500 value to its 10-year average of inflation-adjusted earnings.

S&P 500 CAPE

Conclusion

The bull-bear indicator at 40% warns of a bear market, while extreme pricing highlights the risk of a significant drawdown.

Acknowledgments

Notes

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ASX Market Snapshot

Bull-Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates whether the market is in a bull or bear phase, while the one on the right reflects the current valuation of the stock market. Stock market pricing indicates whether stocks are cheap or expensive in relation to earnings, but it is a poor indicator of market timing. We do not recommend selling stocks when market valuations are high, but we advise caution when adding new positions.

Bull/Bear Market

The ASX Bull-Bear Market indicator remains at 56%, from 66% eight weeks ago. One of four Australian indicators and one of two Chinese indicators signal risk-off. When combined with the US Bull/Bear indicator, which has a 40% weighting, the composite indicator signals a mild bear market.

ASX Bull-Bear Market Indicator

The ASX 200 continues its long-term downtrend relative to gold (in Australian Dollars).

ASX 200/Gold in AUD

The ASX 200 Financials Index weakened to 9475 but still signals risk-on. We expect a correction to test primary support at 9000.

ASX 200 Financials Index

Stock Pricing

ASX stock pricing increased to 84.47 percent, from 83.79 percent last week, as the market retreated. The August 2025 high was 92.23 percent, with an April low of 67.85 percent.

ASX Stock Market Value Indicator

We use z-scores to measure each indicator’s current position relative to its historical data, with results expressed in standard deviations from the mean. We then calculate an average of the five readings and convert that to a percentile. The higher stock market prices are relative to their historical mean, the greater the risk of a sharp drawdown.

Conclusion

The ASX bull-bear indicator at 56% signals a mild bear market, while stock market pricing continues to warn of an elevated risk of a drawdown.

Acknowledgments

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No Quick Exit

Key Points

  • Brent crude futures (May’26) rose after President Trump paused his threatened attack on Iran’s energy facilities until April 6.
  • The S&P 500 broke primary support at 6550.
  • The Dollar strengthens with the prospect of higher interest rates.
  • Gold tests primary support at $4,400 per ounce.

Brent crude rallied to $109 per barrel on news that negotiations may take longer than initially indicated. Retracement will likely respect support at $105 per barrel, signaling another test of $114.

Brent Crude Futures (ICE May'26)

Markets continue to receive conflicting messages on the war with Iran.

President Trump said he would extend a pause to attack Iran’s energy facilities to April 6, a little over a week after the original deadline that was set to end Friday.

“As per Iranian Government request, please let this statement serve to represent that I am pausing the period of Energy Plant destruction,” Trump said in a Truth Social post. “Talks are ongoing and, despite erroneous statements to the contrary by the Fake News Media, and others, they are going very well. Thank you for your attention to this matter!” (CNBC)

Iran’s Foreign Minister ruled out direct talks with the US but says they are reviewing the US 15-point proposal submitted through Pakistani intermediaries.

House Speaker Mike Johnson said Wednesday that Operation Epic Fury is “almost done” and is “wrapping up.”

….Johnson said that the objectives of the operation “have been met,” but access to the Strait of Hormuz still needs to be “straightened out.” (CBS)

The military buildup continues:

WASHINGTON, March 24 (Reuters) – The Pentagon is expected to send ​thousands of soldiers from the U.S. Army’s elite 82nd Airborne Division to the Middle East, two people familiar with the ‌matter told Reuters on Tuesday, adding to a massive U.S. military buildup even as President Donald Trump talks about a possible deal with Tehran to end the war.

The New York Post:

The Pentagon is reportedly considering a plan to send an additional 10,000 troops to the Middle East amid the war with Iran.

The potential deployment would likely include infantry and armored vehicles and would be on top of the 5,000 Marines and sailors and roughly 2,000 members of the Army’s 82nd Airborne Division who have already been dispatched to the region, according to the Wall Street Journal.

When one party threatens the other, it is normally a sign that the negotiation is not going well:

President Trump is ready to “unleash hell” on Iran if Tehran does not accept a deal to end the war in the Middle East, the White House warned on Wednesday.

“If Iran fails to accept the reality of the current moment, if they fail to understand that they have been defeated militarily and will continue to be, President Trump will ensure they are hit harder than they have ever been hit before,” Press Secretary Karoline Leavitt said in a briefing.

“President Trump does not bluff and he is prepared to unleash hell.” (CBS)

Iran and Israel seem to have longer-term objectives, but President Trump is desperate for an off-ramp. Opinion polls show the war is unpopular in the US:

Reuters/Ipsos Opinion Poll

The Iranians know that the closer it gets to the US midterms in November, the greater their leverage.

Trump has few good options: escalate the conflict or settle on a potentially bad deal with a weakened yet defiant Iran that has choked off much of the world’s oil supply….

A clear and quick victory could pay dividends for Trump politically. But a settlement that credibly contains Iran appears to be far off….

The terms required to wind the war down may involve concessions to Tehran that do not satisfy Israel, which appears to want to press ahead. (Reuters)

Copper continues its downtrend, warning that the global economy is slowing.

Copper

Mega-cap technology stocks are dragging the major indices lower. The Roundhill Magnificent 7 ETF (MAGS) signals a strong bear trend after breaking primary support at 63 in early February.

Roundhill Magnificent 7 ETF (MAGS)

The S&P 500 has now followed with a breach of primary support at 6550, confirmed by the recent dead cat bounce.

S&P 500

The Dow Jones Industrial Average is testing the primary support band between 45,500 and 46,000. A breach would confirm the S&P 500 bear market signal.

Dow Jones Industrial Average

The S&P 500 Equal-Weighted Index ($IQX) shows that large caps are now outperforming mega caps, which had led the market for several years. It’s all relative, however. Declining Trend Index peaks below zero warn of selling pressure.

S&P 500 Equal-Weighted Index

Bitcoin1 continues to test the support band between 64,000 and 70,000, indicating that financial markets have become risk-averse.

Bitcoin (BTC)

10-year Treasury yields respected support at 4.3%, offering a short-term target of 4.65% as the prospect of further rate cuts fades.

10-Year Treasury Yield

The US Dollar Index is testing resistance at 100, driven by the prospect of higher interest rates.

Dollar Index

Gold is testing primary support at $4,400 per ounce. Respect, indicated by recovery above $4,600, would indicate another test of $5,000, while a breach would offer a target of $4,000.

Spot Gold

Conclusion

Mixed messaging over negotiations with Iran indicates that progress is slow. Conflicting objectives between the US and Israel may also prevent a quick resolution to the war against Iran. A quick exit is unlikely.

A downtrend in copper prices warns that the global economy is slowing.

The S&P 500 broke support at 6550, signaling a primary downtrend. A Dow Jones Industrial Average breach of primary support at 45,500 would confirm a bear market.

The prospect of higher interest rates, with the market pricing out further rate cuts, has strengthened the Dollar, triggering a selloff in gold. A breach of primary support at $4,400 per ounce would offer a target of $4,000, while respect of support would signal another test of $5,000.

Acknowledgments

Notes

  1. Cryptocurrencies are the highest-risk asset class, and we analyze Bitcoin (BTC) solely to identify risk sentiment in financial markets. Our analysis is not a recommendation to buy or sell BTC, nor is it a commentary on the merits of cryptocurrency.
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Australian CPI Shock Ahead

Key Points

  • The Australian Consumer Price Index (CPI) rose 3.7% for the 12 months to February, down from 3.8% in January 2026.
  • The average wholesale price of diesel jumped to $2.83 per liter by Friday, March 20, compared to $1.62 in February.

The Australian Consumer Price Index (CPI) rose 3.7% for the 12 months to February, down from 3.8% in January 2026, while the Trimmed Mean held steady at 3.7%. While above the RBA’s target of 3.0%, the seasonally adjusted increase of just 0.2% in February offered a glimmer of hope that inflation is easing.

Australian CPI & Trimmed Mean CPI

A breakdown shows that most inflationary pressure comes from non-tradables (5.0%) compared to tradables (1.3%). Tradables are goods and services that are largely influenced by international trade prices, such as auto fuel, most food items, clothing, and footwear. Non-tradables such as household rents, health care, and education are mostly influenced by domestic factors.

Australian CPI: Tradables & Non-Tradables
However, we expect a sharp rise in tradables CPI in March, driven by a massive spike in crude oil prices.

Wholesale diesel prices (TGP) jumped to an average of 283.1 cents per liter by Friday, March 20, compared to an average of 162.3 cents for the week ended February 22—an increase of nearly 75% in just four weeks.

Australian Diesel TGP & Singapore Gasoil

Conclusion

We expect a steep rise in March CPI, which increases the chance of further rate increases from the RBA.

Acknowledgments

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Gold Plunges

Key Points

  • Gold is trading at $4,230 per ounce, having breached primary support at $4,400.

Gold breached primary support between $4,400 and $4,600 per ounce, triggering further stop-loss selling.

Spot Gold

There are two primary reasons for the current sell-off:

  1. Gulf states are expected to liquidate reserves, including gold bullion, to support their finances as oil export revenues are curtailed.
  2. Long-term interest rates are rising in anticipation of an inflation spike caused by high energy prices from the Iranian blockade. High interest rates make bonds more attractive and reduce demand for gold.

Bullion sales will likely cause a temporary increase in supply, driving down gold prices until reserves are exhausted or Iran’s blockade of Gulf shipping ends. Demand is likely to increase thereafter as reserves are replenished.

Long-term Treasury yields are rising. Breakout of the 10-year yield above 4.3% indicates another test of resistance between 4.8% and 5.0%.

10-Year Treasury Yield

However, rising inflation and long-term interest rates will likely have less influence on gold demand because the two forces tend to offset each other. High inflation increases demand for gold as an inflation hedge, while high interest rates increase the opportunity cost of holding gold and suppress demand.

Our long-term bullish outlook for gold is based on the belief that precariously high US debt levels will eventually force the Fed to suppress long-term interest rates.

US federal debt jumped to $38.5 trillion at the end of 2025.

Federal Debt

The ratio of federal debt to nominal GDP is at an unsustainable 122.5%.

Federal Debt to Nominal GDP (%)

Moreover, the fiscal deficit will likely exceed $2 trillion for the current fiscal year. The deficit for the 5 months to February 2026 is at $1 trillion, but the next few months are about to blow a big hole in the budget.

Federal Deficit

First, the US Supreme Court has ruled that tariffs implemented by the Trump administration exceed the President’s constitutional powers, and most of the $144 billion in Customs Duties collected will need to be refunded.

Second, the newly renamed Department of War is about to present Congress with a $200 billion bill for the US war on Iran, so far. The war is only three weeks old, and the final bill will likely be a lot higher.

Third, rising energy prices threaten to crash the stock market. A crash would substantially reduce capital gains, a major component of Individual Income Tax revenue.

Finally, rising interest rates will further widen the ballooning deficit, with accelerating government debt-to-GDP ratios raising risk premia, which in turn drive interest rates even higher.

The Federal Reserve would be forced to prioritise the faltering US Treasury over the Dollar, thereby sacrificing its mandate to maintain price stability. Long-anticipated fiscal dominance would mean the Fed suppresses long-term yields to improve the Treasury’s ability to service its debt. The resulting sharp rise in inflation would undermine the Dollar and boost demand for gold and other inflation hedges.

Conclusion

We expect gold to test support at $4,000 per ounce.

However, our long-term outlook for gold remains bullish, with ballooning budget deficits and fiscal dominance likely to cause a steep rise in inflation and erode the purchasing power of the Dollar.

 

Acknowledgments

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US Market Snapshot

Bull/Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates whether the market is in a bull or bear phase, and the indicator on the right reflects the current valuation of the stock market. Stock market pricing indicates whether stocks are cheap or expensive in relation to earnings, but it is a poor indicator of market timing. We do not recommend selling stocks because market valuations are high; however, we recommend exercising caution when adding new positions.

Bull/Bear Market

The Bull/Bear indicator remains at 40%, warning of a bear market ahead, with three of five indicators signaling risk-off.

US Bull-Bear Market Indicator

The Chicago Fed National Financial Conditions Index increased to -0.486 from -0.514 last week. Financial conditions are tightening, and a rise above -0.40 would signal risk-off.

Chicago Fed National Financial Conditions Index

Stock Pricing

Stock pricing eased to 92.37 percent from 94.60 percent last week. The steep change from 98.64 two weeks ago is partly attributable to a break in the series. We replaced the Price-to-Sales ratio and Forward Price-Earnings Ratio for the S&P 500 with similar series for the Dow Jones Industrial Index. However, there is one notable difference: we use a 20% trimmed mean, which excludes the top 10% and bottom 10% of readings for individual stocks, to minimize distortion from outliers in the smaller index population of 30 stocks. The reading remains extreme, warning of a significant drawdown in stocks.

US Stock Market Value Indicator

We use z-scores to measure each indicator’s current position relative to its historical data, with results expressed in standard deviations from the mean. We then calculate an average of the five readings and convert that to a percentile. The higher the stock market price measure is relative to the historical mean, the greater the risk of a sharp drawdown.

Warren Buffett’s favored long-term measure of stock market value, the ratio of stock market capitalization to GDP, continues to warn of extreme valuations. The pull-back to 2.91 remains more than double the long-term mean of 1.20, indicating the potential for a large drawdown.

Stock Market Capitalization Ratio to GDP

Conclusion

The bull-bear indicator at 40% warns of an impending bear market, while extreme price levels highlight the risk of a significant drawdown.

Acknowledgments

Notes

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ASX Market Snapshot

Bull-Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates whether the market is in a bull or bear phase, while the one on the right reflects the current valuation of the stock market. Stock market pricing indicates whether stocks are cheap or expensive in relation to earnings, but it is a poor indicator of market timing. We do not recommend selling stocks when market valuations are high, but we advise caution when adding new positions.

Bull/Bear Market

The ASX Bull-Bear Market indicator remains at 56%, from 66% eight weeks ago. One of four Australian indicators and one of two Chinese indicators signal risk-off. When combined with the US Bull/Bear indicator, which has a 40% weighting, the composite indicator signals a mild bear market.

ASX Bull-Bear Market Indicator

The ASX 200 Financials Index weakened to 9548.6 but continues to signal risk-on. The retracement will likely test primary support at 9000.

ASX 200 Financials Index

Stock Pricing

ASX stock pricing eased to 83.79 percent, from 85.01 percent last week, as the market retreated. The August 2025 high was 92.23 percent, with an April low of 67.85 percent.

ASX Stock Market Value Indicator

We use z-scores to measure each indicator’s current position relative to its historical data, with results expressed in standard deviations from the mean. We then calculate an average of the five readings and convert that to a percentile. The higher stock market prices are relative to their historical mean, the greater the risk of a sharp drawdown.

Conclusion

The ASX bull-bear indicator at 56% signals a mild bear market, while stock market pricing is extreme, suggesting an elevated risk of a drawdown.

Acknowledgments

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S&P 500 Bear Market Warning

Key Points

  • Brent crude futures (May’26) rose to $112 per barrel.
  • 10-year Treasury yields jumped to 4.39%.
  • The S&P 500 broke primary support at 6550.

The war in Iran is in danger of escalating, sending the global economy into recession.

WASHINGTON, March 18 (Reuters) – President Donald Trump’s administration is considering deploying thousands of U.S. troops to reinforce its operation in the Middle East, as the U.S. military prepares for possible next steps in its campaign against ​Iran, said a U.S. official and three people familiar with the matter.

The deployments could help provide Trump with additional options as he weighs expanding U.S. operations, with the Iran war well into ‌its third week.

Those options include securing safe passage for oil tankers through the Strait of Hormuz, a mission that would be accomplished primarily through air and naval forces, the sources said. But securing the Strait could also mean deploying U.S. troops to Iran’s shoreline, said four sources, including two U.S. officials.

Reuters granted the sources anonymity to speak about military planning.

The Trump administration has also discussed options to send ground forces to Iran’s Kharg Island, the hub for 90% of Iran’s oil exports, the three people familiar with the matter and three U.S. ​officials said. One of the officials said such an operation would be very risky. Iran has the ability to reach the island with missiles and drones.

News of preparations for a ground war spooked financial markets.

CBS News said “heavy preparations” were being made for sending ground troops to Iran, citing multiple sources….

“If this is an escalation involving troops on the ground, then we’re probably in for at least a couple more weeks of this sort of market of higher oil prices, high gas prices; you’re hanging on every headline about energy infrastructure in the region,” Baird investment strategist Ross Mayfield said to CNBC. “Quite frankly, equity markets haven’t sold off in a way that would reflect this sort of event yet, so there could still be some some downside ahead.” (CNBC)

Brent crude futures (ICE May’26) climbed above $112 per barrel by the close of the week.

Brent Crude

Ten-year Treasury yields spiked up 4.39%. The breakout above the 4.3% resistance level indicates another test of the 2023 high at 5.0%.

10-Year Treasury Yield

The S&P 500 broke primary support at 6550, warning of a bear market.

S&P 500

The Dow Jones Industrial Average is testing primary support at 45,500. A breach of the support level would confirm the S&P 500 bear market signal.

Dow Jones Industrial Average

The Roundhill Magnificent 7 ETF (MAGS) has already broken support at 60, confirming a primary downtrend in the seven mega-cap technology stocks that led the bull market advance.

Roundhill Magnificent 7 ETF (MAGS)

The Chicago Fed National Financial Conditions Index jumped to -0.486, the uptick above its preceding peak warning of a contraction in financial market liquidity.

Chicago Fed National Financial Conditions Index

The downtrend in Bitcoin1 has warned of a financial market contraction since late last year.

Bitcoin (BTC)

Conclusion

Prepare for a bear market. The Dow will likely break support at 45,500 next week, confirming the S&P 500 bear signal.

Acknowledgments

Notes

  1. Cryptocurrencies are the highest-risk asset class, and we analyze Bitcoin (BTC) solely to identify risk sentiment in financial markets. Our analysis is not a recommendation to buy or sell BTC, nor is it a commentary on the merits of cryptocurrency.
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Crude Oil Spikes But Gold Falls

Key Points

  • Iranian missiles damaged Qatar’s Ras Laffan Industrial City, the world’s largest LNG export facility.
  • Brent crude futures spiked to $115 per barrel.
  • The Fed kept the fed funds target rate unchanged at 3.50%-3.75%.
  • Gold is testing support at $4,800 per barrel.

From CNBC:

Qatar said Wednesday that Iranian missiles caused “extensive damage” at Ras Laffan Industrial City, home to the largest liquefied natural gas, or LNG, export facility in the world….

Qatar halted LNG production on March 2 due to Iranian drone strikes at Ras Laffan and Mesaieed Industrial City. The Gulf state is the second-largest LNG exporter in the world, after the US Qatar accounts for nearly 20% of global LNG exports, according to data from energy consulting firm Kpler.

Iran is also attacking oil export facilities outside the Persian Gulf to further restrict global energy supply. From Reuters yesterday:

Omani ​crude – exported from a terminal outside the Strait of Hormuz – is trading at a record premium of $51 a barrel to Brent, compared with an average of just 75 cents in February, pushing the outright price to around $150 a barrel for May ​loading.

A similar pattern is playing out elsewhere. Cash premiums for Dubai crude jumped to $56 a barrel on Monday from an average of 90 cents in February, according to data from S&P Global Platts and Reuters.

The surge reflects the enormous uncertainty over the actual amount of supply available amid repeated Iranian strikes on oil terminals in Oman and at Fujairah, the United Arab Emirates’ main oil-exporting terminal outside Hormuz.

Brent crude futures (ICE May’26) climbed to $115 per barrel.

Brent Crude Futures

Fed Monetary Policy

Meet the new head of monetary policy at the Fed.

Iran's Supreme Leader: Mojtaba Khamenei

Spoiler alert: it’s not Kevin Warsh. Iranian cleric, Mojtaba Khamenei, recently appointed supreme leader of the Islamic state, now dictates global monetary policy.

Iran’s chokehold over Gulf states crude oil and LNG production will dominate global employment, inflation, and liquidity for the foreseeable future.

The Fed was on track for further rate cuts, with financial markets expecting three cuts by year-end as the economy slowed and the labor market shed 92,000 jobs in February.

Employment Growth

However, the attack on Iran has flipped the script. Rising crude oil prices are expected to increase inflationary pressure and restrict the Fed’s ability to cut rates.

Core PCE inflation, the Fed’s preferred measure of underlying inflation, had already increased to 3.1% for the 12 months to January 2026, from 2.6% in April 2025.

PCE & Core PCE

Rising energy prices (LHS) will likely cause a spike in CPI (RHS) similar to the increase in 2021 and ’22.

CPI & CPI Energy

Moody’s Baa corporate bond spread climbed to 1.85% on March 17, warning of tighter liquidity in financial markets.

Moody's Baa Corporate Bond Spread

The S&P 500 retreated to 6,625 following news of renewed Iranian attacks. We expect a test of primary support at 6550.

S&P 500

Copper broke support at $12,500 per tonne, anticipating a contraction in demand as the global economy slows.

Copper

Gold broke support at $5,000 per ounce, finding short-term support at $4,800. Axel Merk attributes the recent sell-off to “deleveraging among speculators, global growth headwinds, and an oversold condition in some markets after a very strong January run-up.”

Spot Gold

However, there was a similar sell-off in March 2020 (below), shortly after the outbreak of the COVID-19 pandemic. A liquidity contraction and the rebalancing of risk-parity funds caused a sell-off across all major asset classes, including stocks, bonds, and precious metals. Gold recovered in April, rallying to $2,050 per ounce by August 2020.

Spot Gold

Gulf states could also be liquidating reserves to support their economies while oil exports are restricted.

The monthly chart below shows the long-term uptrend since March 2024, when gold broke out above resistance at $2,000. We are now witnessing a pull-back to test primary support at $4,500. Respect of support will likely signal another strong advance.

Spot Gold

Conclusion

The Fed is powerless to fight inflation caused by the Iranian chokehold over global energy supplies. They are also constrained in their ability to use monetary policy to support a weak labor market because of the looming threat of inflation.

Our bullish thesis for gold remains. Precarious sovereign debt levels limit governments’ ability to support their economies without fueling inflation. Political leaders are also reluctant to adopt more restrictive fiscal policy because of the impact on their economies. The outcome will likely be prolonged currency debasement through inflation, with gold bullion eventually replacing US Treasuries as the global reserve asset.

Acknowledgments

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