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Asset Allocation Insights -Rewarding Growth Assets

Weekly Asset Allocation Highlights

  • Equities had a big week last week as the market focused on growth again
  • International assets dominated US assets as the US dollar lost some ground
  • EM stocks, in particular, had a good week, up 2.7%. Very little was currency related
  • European developed market equities also had a big up week (2.5%)
  • REITS had been slowly recuperating but last week they suffered a setback
    • Their behavior has recently become more aligned/correlated with equity markets so the poor performance comes as a surprise
  • A 60/40 mix of purely US assets vastly under-performed a global version
  • Higher risk multi-asset strategies out-performed last week

Currencies:

  • The USD lost some strength last week
  • Within EM currencies the pattern was mixed
    • The Rand appreciated over 2% but the real lost close to 5%
  • The Rubble continues imploding despite a jump in oil prices
  • Among the major currencies, the US dollar lost the most ground versus the Euro followed by the Pound
  • The Yuan has stabilized after a period of depreciation but remains volatile within the “official” range

Commodities:

  • Grains are getting whipsawed by trade war on/off issues
    • Corn and soybeans continue being most at risk
  • Oil is also getting whipsawed by political tensions but had a big up week due to smaller inventories in the US, robust Chinese demand and output curbs in Iran
  • Gold and Silver recovered a bit last week but the trend is down especially as ST interest rates keep climbing higher
  • The large fall in coffee prices last week was blamed on the falling Brazilian real – expect a reversal this week

This Coming Week:

  • Watching the USD – crushing investors in international assets but should be losing some momentum
  • International equities keep losing ground to US stocks despite superior fundamentals
  • 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
  • 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?
  • Macro Events: Case-Shiller, US GDP, Japanese & German Inflation, rig count in US, Chinese PMI

 

To read our full weekly report please click here

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

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Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

 

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