MSCI Europe was up >50% y-o-y during 8 days in March. This has happened on 80 individual days since 1919 (page 4). This historical observation
suggests a pause in the cyclical bull market for 3-6 months, before markets rise further: on average, the next 12 months the market was up 10% (up
96% of the time), while the next 6 months the market was down by 4% (down 77% of the time). This coincides with our fundamental view. We expect further good economic news.

We expect a market correction to start in Q2, when good economic news becomes bad market news for a while. We acknowledge this correction may not start quite yet, because of dovish central banks, muted inflation expectations and our indicators' signals. At some point, just like in 1994 and 2004, good economic news will become bad market news, because it leads to a policy reaction (Fed language change, tightening measures) or a market reaction (higher bond yields, inflation expectations). This typically happens around the time when it becomes crystal clear that we have a genuine recovery. In our judgment we are moving closer to that moment, we expect it to start in Q2, but it may not be quite imminent.

Eoin Treacy's view Although we are coming at the issue from somewhat different directions, we have a largely similar perspective. Most stock markets performed extremely well in March and are so far having a good April. If this performance continues into May, a number of indices will have become even more overextended relative to their 200-day moving averages which would make a reversionary process more likely. However, in such a scenario we are looking for no more than a pullback towards the MA. Provided most indices, and Wall Street in particular, remain to the left side of their ascending MAs we can continue to give the benefit of the doubt to medium-term uptrends.