Global six-month real money growth – on both narrow and broad definitions – is estimated to have risen to another post-WW2 high in June, based on data for the US, China, Japan, Brazil and India, which have a combined two-thirds weighting in the G7 plus E7 aggregates calculated here.

A global leading indicator derived from the OECD’s country leading indicators usually mirrors monetary swings with a lag and posted a second large monthly rise in June, confirming an April low – second chart. The OECD indicators exclude money for most countries so represent an independent cross-check.

The equity analysts’ weekly revisions ratio, meanwhile, has normalised, consistent with the global manufacturing PMI new orders index rising further to 50-55 in July – third chart.

An April low in global economic momentum coincided with a low in the relative performance of “old economy” cyclical equity market sectors (i.e. materials, industrials, consumer discretionary, financials and real estate) versus defensive sectors (i.e. consumer staples, energy, health care and utilities) – fourth chart.

This old economy cyclical / defensive sector relative has exhibited a significant correlation historically with the US 10-year Treasury yield – fifth chart (correlation coefficient = 0.92 over 1995-2019). The recovery in the relative since April has opened up a wide divergence with a static yield, suggesting that one or other market is mispriced – monetary trends argue bonds.