Markets have been volatile. It appears we may see this kind of volatility for some time. What are the BFIA indicators signaling? Our long-term indicators are quite bearish on the United States and China. We have small exposures to these markets. We are completely out of the US equities market and have purchased a US high yield debt ETF. The BFIA behavioral indicators are more bullish on the bond market currently than the stock market. Our top long-term markets again are India, South Korea, South Africa, and Israel.
Our short-term indicators have eased a bit. However, our US short-term indicator is still signaling to hedge the US market for now. This means there may be some more volatility in the next two weeks. Therefore, we recommend exiting your US position or hedging your US position as well as other developing country positions such as Europe and Japan. Our exposure for the bond market has increased based on the movement of our indicators for developed market equities.
Our third indicator signals that the US market is 20% undervalued and it has been hovering at 20% undervalued for the last year or so. Therefore, in the near term we do not see major downside but moderate downside in which the market will recover to its 20% undervaluation.
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