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

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

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

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Eric J. Weigel

Global Focus Capital LLC

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