More...
617-529-2913
20 Adams Street | Suite 200 | Boston, MA 02129

Monthly Archives: March 2019

Asset Allocation Insights – Investors Benefit From Riskier Asset Classes


Risk taking is in, but is risk underpriced again?

►The seesaw continues with risk assets doing particularly well this past week

►US large caps performed best – up 2.9% for the week, but International Developed equities were only slightly

►Bond strategies delivered positive returns last week as well but significantly below those of more risky asset classes

►On a YTD basis, US small caps lead the pack by a slight margin – up 15.5%

►In the context of balanced 60/40 strategies US strategies and international strategies performed in line with each other (both up 1.9%)

►Aggressive focused multi-asset class strategies out-performed less risky options

►Within equities, Growth has slightly out-performed Value in 2019 and over the last year Growth also remains solidly ahead

►Thus far in 2019 more aggressive multi-asset strategies have outperformed less risky portfolios

Currencies:

►A rare down week for the USD as expectations for growth in the US slow down and the Fed remains on hold

►For 2019 we still expect the USD to depreciate slightly

►A depreciating USD will boost international asset returns – we expect this effect to persist in 2019

►A big question mark for this coming week is what happens to Brexit (yet again) – sterling is being massively tossed around depending on political prospects

►Interestingly, the pound has held up admirably during this period of uncertainty and is now in a Break Out phase

►The Yen is now in a Break Down phase as investors have regained their desire for risk

►In general, FX volatility has increased substantially in the last couple of months

Commodities:

►After a bad prior week, ag commodities rebounded strongly with wheat, the most beaten down of the group, up over 6%

►The tension in the grain complex is mostly supply driven but soybeans also are being affected by trade negotiations with China

►Commodity indices have moved into an Improving phase as oil markets have found some stability

►Gas was down slightly last week and remains in a Down Trend magnified by weak seasonality

►Copper kept its gains from the previous week as global growth only slows down slightly

►Gold and Silver were flat last week and are showing divergent patterns – gold being stronger than silver

►While inflationary expectations remain low, commodity prices are an excellent hedge should things change

This Coming Week:

►While risky assets have recovered we still think that risk is being shunned at the moment – investors seem uncomfortable making bold bets

►While not comfortable, US investors should consider allocating more money to non-US stocks due to their lower valuations and potentially a depreciating USD

►The strong USD will not persist much stronger as the FED appears close to the end in terms of interest rate hikes

►The Value/Growth discussion is being overshadowed by sector rotation but on a risk-adjusted basis we believe that higher allocations to Value are warranted

►We are also watching out for any jump in inflationary expectations (which have been trending down)

►Tariffs are inflationary and will be reflected in higher consumer prices eventually

►Our biggest concerns revolve around a slowing global economy – The IMF recently lowered 2019 growth numbers to 3.5%

►We still see a risk on/off market this year making it difficult for short-term investors – probably best to extend horizons

__________________________________________________________________________________

To read our full weekly report please click here

 

ic J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

______________________________________________________________________________

 

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Equity Market Highlights – Cold Showers Never Feel Good in March

https://gf-cap.com

“Is the market high only because of some irrational exuberance— wishful thinking on the part of investors that blinds us to the truth of our situation?” 
― Robert J. Shiller

►Equity markets have staged a remarkable recovery after a dismal Q4 but last week was a wake-up call

►Over the last month, US small and large caps have performed in line with each other but ahead of international equity strategies

►Over the last 12 months, US large cap equities are up slightly while US small cap and international still show losses

►Valuations are still a bit stretched in the US but growth and profitability are hanging in

►The key for equity markets is global growth and whether we are entering a slowdown or not

Countries & Region:

►A global recovery for equities was interrupted last week as growth concerns returned to the forefront

►Commodity indices were flat last week as oil prices firmed but agricultural markets headed south due to excess supply conditions

►In the US Value slightly under-performed  Growth last week, but the main style effect was size (the smaller the worse)

►In international markets Value under-performed Growth by a wider margin driven primarily by sector differences

►Globally, Energy, Financials and Health Care under-performed last week while interest-sensitive sectors such as Telecom and Utilities held their own


Style & Sector:

►In the US, we saw Small Caps do worse than large caps

►The size effect in the US was really strong last week

►Within equity styles, Quality, Yield, and Low Vol strategies delivered lower losses (lower beta)

►The Momentum has lost “mo” – momentum stocks have underperformed the general market this year

►International equities last week took a hard hit both in local currency as well as through currency losses

►On a YTD basis developed Europe has outperformed other international strategies


This Coming Week:

►The strength of the equity market recovery has been impressive especially among small caps

►We believe that a risk on/off market is likely this year

►Given the low levels of investor risk aversion we would expect a reversal in the near future

►Equity Technicals have deteriorated to the point that 35% of stocks remain in the Down Trend Phase

►Political drama in Washington is exacerbating the uncertainty of market participants but investors seem to be in denial thus far in 2019

►Brexit is up for the spring but prospects of passing Parliament are slim. Could we be starring at Referendum 2.0?

►Tariff wars are taking a bite with the IMF recently citing trade wars as the main reason for a cut in their forecast of global growth

►Our models still favor a reduction in risk in our portfolios with positive active allocations to cash and bonds

►The price of higher equity returns is discomfort – volatility has been too low in the last few years

►While Value is holding its own with Growth we still see the action at the sector level rather than in terms of pure valuation

To read our weekly report including style factor breakdowns please click  here

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

______________________________________________________________________________

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Asset Allocation Insights – Investors Forget About Risk


Risk Loving is in but for how long?

►The comeback for holders of risky assets was interrupted this week as growth concerns returned

►EM, Commodities and Reits had poor weeks as commodity prices suffered again and interest rates increased in the US

►On a YTD basis US small caps lead the pack by a wide margin – up 18.1%

►In the context of balanced 60/40 strategies US strategies out-performed strategies more globally focused

►Aggressive focused multi-asset class strategies out-performed less risky options

►Within equities, Growth has slightly out-performed Value in 2019 and over the last year Growth also remains solidly ahead

►Thus far in 2019 more aggressive multi-asset strategies have outperformed

Currencies:

►Flat week fort the USD

►For 2019 we still expect the USD to depreciate slightly

►A depreciating USD will boost international asset returns – we expect this effect to persist in 2019

►A big question mark for this coming week is what happens to Brexit (yet again) – sterling is being massively tossed around depending on political prospects

►The Yen is now in a Break Down phase as investors have regained their desire for risk

►In general, FX volatility has increased substantially in the last couple of months

Commodities:

►Commodity indices have moved into an Improving phase as oil markets have found some stability

►Gas was up big last as it became less oversold

►Copper moved down slightly after a big spike up the previous week – still very growth oriented

►Gold and Silver were slightly down last week and are showing divergent patterns

►While inflationary expectations remain low, commodity prices are an excellent hedge should things change

This Coming Week:

►While risky assets have recovered we still think that risk is being shunned at the moment – investors seem uncomfortable making bod bets

►While not comfortable, US investors should allocate more money to non-US stocks due to their lower valuations and a depreciating USD

►The strong USD will not persist much stronger as the FED appears close to the end in terms of interest rate hikes

►The Value/Growth discussion is being overshadowed by sector rotation but on a risk-adjusted basis we believe that higher allocations to Value are warranted

►We are also watching out for any jump in inflationary expectations (which have been trending down)

►Tariffs are inflationary and will be reflected in higher consumer prices eventually

►Our biggest concerns revolve around a slowing global economy – The IMF recently lowered 2019 growth numbers to 3.5%

►We still see a risk on/off market this year making it difficult for short-term investors – probably best to extend horizons

__________________________________________________________________________________

To read our full weekly report please click here

ic J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

______________________________________________________________________________

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

HTML Snippets Powered By : XYZScripts.com