The European equity indexes are delivering bullish signals in these early sessions of 2018, even if some weakness at the end of last year gave room to concerns regarding the persistence of the trend.

The European markets, which performances have been generally positive but much less euphoric than those of Wall Street, have been laggards in 2017. Rather than a linear uptrend, like that of the U.S. benchmarks, the main equity indexes in Europe were roller coasters along the year. A corrective wave during the summer corresponded to the sharp rally of the Euro against the U.S. Dollar and this is not a coincidence: a stronger currency, as everyone knows, does not help the stock market.

I am closing this year with a piece dedicated to a promiseful but sneaky Supersector about which I have already discussed in two previous articles (see note 1).

Let’s start with the promiseful side: in mid May, I wrote about the STOXX Supersector Europe 600 Basic Resources Index, and the possibility for this Index to continue an intermediate uptrend after the end of a retracement period that started in late February (1).

Did you know that one of the most popular keywords in the Google searches last month, was “yield curve flattening”? There is a lot of discussion these weeks about the narrowing spread between the long and short term maturities in the Treasury Notes yields.

Such a spread has shrunk at the lowest levels since 2007. Why is this a cause of concern? The yield curve is the difference in reward the investors receive for locking their investments for longer periods of time, which means greater uncertainty. A compensation for investors who tolerate the extra risk is usually called risk premium. But when such premium fades away then the yield curve is flat, when the spread is negative, the curve is inverted.

Gold has taken a bit of a dive over the last few weeks and more generally since September. In our view, it is suffering from the bounce we’ve seen, to various extents, since early September, on reflationary assets (US long term rates, the Dollar, Oil). We hereby review these dynamics with a 3 months and 12 months view.

Call it profit taking, call it sectors rotation, the sudden increase in volatility that hit Wall Street just at the dawn of the last month of the year deserves some attention.

Most of 2017 has been spent in an uptrend driven by the Technology sector and no significant drop hit the market during the year. Another peculiarity of 2017 has been the constant decrease in correlation among sectors: most stocks usually follow a common trend, not this year.

This Monday I was at Lantern Fund Forum of Lugano, and the main speaker was John Mauldin. One of his main reflections was on how it is possible to manage money in a world where central banks and governments buy assets massively and indiscriminately, without assessing the value of what they buy.

A couple of months ago I had analyzed the bullish pattern that was developing on Crude Oil, when the WTI had exceeded the 200 days moving average and was about to test the crucial resistance of the trendline that joins the 2014 top with the decreasing highs of the first half of this year.

From its lows early September, the Dollar/Yen has followed risk assets and interest rates up in their rebounds. This positive momentum was further supported late October by the re-election of Shinzo Abe in Japan, famous for his Abenomics or aggressive monetary and fiscal stimulus. In this article we review the perspective for Dollar/Yen over the next few months and quarters.