Cover curse indicator
The cover curse is a well-known contrarian indicator.
It goes something like this: by the time a trend in markets is sufficiently widely known to feature on a magazine cover, it's probably fully priced in, and most likely is about to run its course.
In fact, a study in 2016 found that 68 per cent of covers of the The Economist were contrarian indicators after one year, on subjects variously ranging from stocks, to oil, to the US dollar.
But a month ago, bonds were in the firing line...
Source: The Economist
While just one month might be too early to say for sure, this does seem to have bottom-ticked the market in bonds, with the market rallying hard since.
Australia has been following suit, with the 3-year bond yield trading about 35 basis points below recent highs.
For sure, there's a way to go before we can say with any certainty that the peak of the interest rate cycle has passed, not least because next the coming inflation data are Australia is likely to remain elevated for a while (fuel, credit card policy changes).
But with the cash/3-year part of the yield curve inverted (if not the standard 2s10s measure), it looks like we may be close.
Granted, the plural of anecdote is not data, but in Ascot in Brisbane this week we missed out on a unit for the first time in almost six months, with a total of five offers submitted, while another house we were tracking in the Clayfield electorate sold for well above the asking price.
Still relatively few investors in the market, but some signs of life.
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It will be an interesting year ahead, with tech firms committing to trillions of dollars of capital expenditure for AI, but with less clarity around how adequate returns will be generated in the short-term.
In the medium-term, AI should create more efficiencies and free up resources to fire economic growth, but in the short-term businesses may need to cut their headcounts significantly to justify their spend on tokens.
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