Weekly Asset Allocation Highlights

President Trump wasn’t the only one having a bad week – is this a Fake Correction?
Cash is king once again but our risk aversion index is not picking up any fear
US assets lost less last week if that is any consolation
International equities lost the most value last week
A 60/40 mix of purely US assets out-performed a global version once again
Lower risk multi-asset strategies out-performed last week and are ahead in the last month

Currencies:

The USD was range bound last week but continues in a technical Up Trend phase
Within EM currencies the pattern was mixed
- The Rand continued depreciating while the Brazilian Real regained some ground versus the USD
Within the major currencies, the yen outperformed
The Yuan has stabilized after a period of depreciation but remains volatile within the “official” range

Grains are getting whipsawed by trade war on/off issues
- Corn and soybeans continue being most at risk but regained some ground last week while Wheat continues deteriorating
Oil is also getting whipsawed by political tensions – down over 3% last week after several up weeks
Gold and Silver lost more ground last week and the trend is down especially as ST interest rates keep climbing higher

Is cash the new King?
- Bonds and stocks are over-valued but growth still holding up which is positive for stocks but for how long?
- We still prefer risky assets but are lowering risk at the portfolio level.
Are political issues in Washington of any concern to markets? Our risk aversion index is not picking up any concern at the moment.
The strong USD keeps crushing investors in international assets but should be losing some momentum.
International equities keep losing ground to US stocks despite superior fundamentals – becoming the contrarian play of 2018
EM equities, in particular, are taking a huge hit both on the asset side as well as currency
- China has a lot to do with this given its weight in the MSCI index (30%)
Growth is outperforming Value YTD but things may be turning around especially if interest rates remain range bound
Global Tech has performed well this year but short-term it is in a break Down phase. More bad news to come or buy the dip? We are holding steady, not buying more.
Gold and Silver are losing their luster – not providing downside hedge and very driven by trends in short-term rates
What will make investors price risk more in line with history?
- A growth scare in the US, maybe? A real inflation scare? Waiting for Impeachment?

To read our full weekly report please click here

Eric J. Weigel

Global Focus Capital LLC

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