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
- 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
This Coming Week:
- 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?
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Eric J. Weigel
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