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Equity Market Insights – Bumped into the Ditch by Tariffs

Equity Markets Bloodied Again By Tariffs

  • A brutal week for risk-taking – all major equity asset classes lost money last week
  • Higher rates contributed to this as well as slower expected global growth due to an escalation of tariffs
  • EM Equities have taken a real beating this year down over 17%
  • YTD only US Large Cap is in positive territory
    • The S&P 500 is up 1% for the year


Countries & Region:

  • Carnage all over the place – a global retreat from risky assets
  • Equities vastly under-performed bonds last week despite generally higher global interest rates and decent growth
  • In the US Growth out-performed Value over the last 5 trading by over 40 bp
    • Traditional Value sectors such as Energy, Industrials and Telecom did not provide any downside protection
  • Utilities and Staples, two traditional low beta sectors lost the least


Style & Sector:

  • In the US, mega-caps underperformed small caps by 10 bp last week
  • Value once again under-performed Growth as the Energy and Telecom sectors provided a huge drag
  • Growth and Momentum keep dominating YTD among US stocks but the lead is shrinking
  • Developed international markets performed in line with US markets but lag significantly YTD
  • EM LATAM recovered last week driven by Brazilian election results favoring a pro-business candidate

This Coming Week:

  • Risk Aversion should stay high and we expect choppy markets this coming week again
  • Technicals have deteriorated massively – sure looks like a bear market or at least a very serious correction
  • We are starting to see oversold conditions but our RAI needs to remain another week in the Fearful Zone to act
  • 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
  • Small caps have massively underperformed large caps over the last 3 months – risk is being shunned at the moment
    • Our models still like small caps better
  • Will EM equities recover? Seems to be all about the direction of the US dollar at the moment. Pretty beat up despite stronger fundamentals
  • What form will sanctions take against Saudi Arabia?
    • Maybe they get a free pass but in any case, I would expect the oil market to be materially affected.
    • Q3 reporting is heavy in the US – looking for commentary on tariffs, slowing growth and inflationary pressures

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

Eric J. Weigel

Global Focus Capital LLC




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