The Most Important Chart in the World

The FTSE All World Index, the benchmark for active global equity fund managers, includes stocks from North America (54%), Europe (23%) and Asia (23%) and provides an excellent read of the overall health of the stock market. The recent deterioration in the trend has us concerned. The stock market today is showing signs of weakness similar to the 2007-2008 experience just prior to the wheels coming off and stocks in aggregate are more expensive today than they were in 2007. 

Despite the FTSE All World Index making a higher high in 2015, relative strength (RSI at the top of the chart) has weakened, which means the market is losing its upside momentum. Fewer stocks are participating in the market advance. One by one, the market leaders are falling. Apple, the largest company in the world at $650 billion, is the latest casualty, closing below its 200 day moving average this week for the first time in over three years. The FTSE All World Index also closed below its 50 week moving average again this week. We continue to advise caution on stocks, particularly as we head into the more seasonally volatile months of August-October.