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Category Archives: Equity Strategies

Equity Market Insights – Paralyzed by Fear

https://gf-cap.com

“Everything you’ve ever wanted is on the other side of fear”

– Jack Canfield

  • The seesaw continues for risky assets –a punch in the nose
  • Last week was particularly bad as equity markets took a deep dive again
  • Surprisingly, EM stocks have lost the least over the last month but YTD remain the worst of the major equity categories
  • YTD US large caps are now in negative territory
  • International strategies have underperformed both in local market returns and a strong USD

Countries & Region:

  • The carnage continues –all major global markets took a nosedive with the US suffering the most
  • Commodity indices took another down leg last week as oil prices dropped again (-13%)
  • REITS are now down 2% for the year after a brutal -5.8% week
  • In the US Value and Growth both got pounded last week with Value outperforming by 1%
  • In international markets Growth under-performed Value last week by 50 bp.
  • Tech and Energy got hit the hardest last week

Style & Sector:

  • In the US, we saw a strong size effect last week with small caps dramatically under-performing
  • Value performed almost as badly as Growth
  • Within equity styles, Low Vol and Div Yield strategies resulted in smaller losses
  • The Momentum trade has gone in reverse
  • Emerging markets outperformed Developed international markets but remain still 15.5% down for the year

This Coming Week

  • Risk Aversion should stay high and we expect choppy markets this coming week again
  • Equity Technicals have deteriorated to the point that close to ¾ of our stocks are in the Down Trend Phase
  • Political drama in Washington is exacerbating the uncertainty of market participants
  • Brexit is up for next year but prospects of passing Parliament are slim. Could we be staring at Referendum 2.0?
  • 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 under-performed large caps over the last 3 months – risk is being shunned at the moment
  • Surprisingly EM equities have outperformed developed markets in the last month.
  • Our models still favor a reduction in risk in our portfolios with positive active allocations to cash and bonds
  • This too shall pass but market participants are hyper nervous on things companies have no control over
  • The price of higher equity returns is discomfort – volatility has been too low in the last few years

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

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

___________________________________________________________________________________

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Major Equity Markets

Equity Market Insights – Utilities Shine While Everything Else Gets Destroyed

Utilities are the new cool kids on the block

    • The seesaw continues for risky assets but utilities emerge as the standout performer
    • Last week was particularly bad as equity markets took a deep dive again
    • Surprisingly, EM stocks are up over the last month but YTD remain the worst of the major equity categories
    • YTD US large caps are barely in positive territory but US small caps are now down for the year
      • The S&P 500 is up 0.3% for the year while the Russell 2000 is down 4.6%
      • International strategies have underperformed both in local market returns and a strong USD

Countries & Region:

  • The carnage continues –all major global markets took a nosedive with Germany suffering the most
  • Commodity indices recovered last week as oil prices moved marginally up
  • REITS continue to be the standout performer – up 1.6% last week and over 6% for the year
  • In the US Value and Growth both got pounded last week (down 3.8%)
  • In international markets, Growth outperformed Value last week
    • Utilities continue delivering – only equity sector up last week

 

Style & Sector:

  • In the US, we saw a strong size effect last week with small caps dramatically under-performing
  • Value performed as badly as Growth despite Utilities being up for the week
  • Within equity styles, Low Vol and Div Yield strategies resulted in smaller losses
  • The Momentum trade has gone in reverse and Growth Stocks are key losers but remain ahead YTD
  • Emerging markets outperformed Developed international markets but remain still 13% down for the year
  • EM LATAM continues extremely volatile and was down 2% last week

This Coming Week:

  • Risk Aversion should stay high and we expect choppy markets this coming week again
  • Equity Technicals have deteriorated to the point that over half of our US universe in is a Down Trend Phase
  • The exception are Utilities where 68% of our stocks are in an Up Trend
  • The political drama in Washington is exacerbating the uncertainty of market participants
  • Brexit is up this week – will the Parliament vote for it?
  • 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
  • Surprisingly EM equities have outperformed developed markets in the last month.
  • REITS have performed extremely well and are YTD our best performing asset class
  • Our models still favor a reduction in risk in our portfolios with positive active allocations to cash and bonds

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

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

___________________________________________________________________________________

 

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

 

Equity Market Highlights – Momentum and Growth Get Mauled

Growth loses its edge as Momentum reverses

  • The last month has been brutal for equity investors
    • Higher rates contributed to this as well as slower expected global growth due to an escalation of tariffs
    • Surprisingly, EM stocks are up over the last month but YTD remain the worst of the major equity categories
  • YTD US large caps are barely in positive territory but US small caps are now down for the year
    • The S&P 500 is up 0.2% for the year while the Russell 2000 is down 2%
    • International strategies have underperformed both in local market returns and a strong USD

Countries & Region:

  • The carnage continues –US growth stocks took a huge pounding last week
  • Commodity indices took a beating last week (due to oil primarily) while the Real Estate market kept recovering
  • In the US Value out-performed Growth over the last 5 trading by over 130 bp
  • In international markets Value and Growth performed in line with each other
    • Traditional Value sectors such as Utilities and Staples outperformed along with Health Care
  • Technology and Energy were the two largest losers last week

Style & Sector:

  • In the US, we saw a strong size effect last week with mega-caps under-performing
  • Value once again out-performed Growth as the Utilities, Health Care and Real Estate performed well
  • The Momentum trade has gone in reverse and Growth Stocks are key losers but remain ahead YTD
  • Developed international markets were down the least last week but remain down 10% for the year

This Coming Week:

  • Risk Aversion should stay high and we expect choppy markets this coming week again
  • Equity Technicals have deteriorated to the point that over half of our US universe in is a Down Trend Phase
  • Tax loss selling is likely to intensify in the next few weeks
  • 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 under-performed large caps over the last 3 months – risk is being shunned at the moment
  • Surprisingly EM equities have outperformed developed markets in the last month.
  • REITS have performed extremely well and are YTD our best performing asset class
  • 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

eweigel@gf-cap.com

___________________________________________________________________________________

 

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

 

Equity Market Insights – Strong Signs of Sector and Style Rotation

It’s Happening- Signs of Sector and Style Rotation

  • Value sectors are gaining momentum while Growth sectors such as Tech is losing steam quickly
  • Similarly, strategies such as low volatility are gaining ground at the expense of pure momentum strategies
  • The last month has been brutal for equity investors but some signs of stability have emerged
    • Higher rates contributed to this as well as slower expected global growth due to an escalation of tariffs
  • YTD US large and small caps are in positive territory
    • The S&P 500 is up 5.7% for the year while the Russell 2000 is up a meager 1.9%
    • International strategies have underperformed due both to local market returns and a strong USD

Countries & Region:

  • The carnage continues among Chinese stocks
  • Commodity indices took a beating last week (due to oil primarily) while the Real Estate market kept recovering
  • In the US Value out-performed Value over the last 5 trading by over 40 bp
  • In international markets Value outperformed Growth by 90 bp
    • Traditional Value sectors such as Utilities and Staples outperformed along with Health Care
  • Health Care and Technology are the two best sectors YTD but Tech has been losing momentum

 

Style & Sector:

  • In the US, we saw a strong size effect last week with mega-caps outperforming
  • Value once again out-performed Growth as the Utilities, Health Care and Real Estate performed well
  • Growth and Momentum keep dominating YTD among US stocks but the lead is shrinking
  • Developed international markets were flat last week but EM equities took yet another hit
  • EM LATAM continues extremely volatile and driven by politics

This Coming Week:

  • Risk Aversion should stay high and we expect choppy markets this coming week again
  • Equity Technicals have deteriorated but have recovered from the ugliness of prior weeks
  • Tax loss selling is likely to intensify in the next few weeks
  • 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 under-performed large caps over the last 3 months – risk is being shunned at the moment
  • Will EM equities recover? Seems to be all about the direction of the US dollar at the moment. Pretty beat up despite stronger fundamentals
  • REITS have performed extremely well and are YTD only slightly behind US equities
  • 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

eweigel@gf-cap.com

___________________________________________________________________________________

 

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

 

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

eweigel@gf-cap.com

___________________________________________________________________________________

 

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

 

Equity Market Insights -Nowhere to Hide

Equity markets get body slammed with small caps taking the biggest hit

  • 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
  • EM Equities lost the least last week (-2%) but continue being the worst performing equity class YTD (-13.6%)
  • YTD US Large Cap has leapfrogged small caps
    • Small caps are down 10% in the last month
  • Our top-rated asset class at the moment is International Developed Markets (EAFE) but last week was not good for this asset (-3.9%)
  • Year-to-date US equities are vastly out-performing international assets – strong home bias fuelled by strong US growth plus an appreciating US dollar
  • In the US Growth outperformed Value but internationally the opposite was true – Investors keep hoping for Value to play better defense
  • Last week woke up investors to equity risk – our Risk Aversion Index jumped to the very top of the Normal Zone

 


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
  • In the US Growth out-performed Value over the last 5 trading days but in the rest of the world Value outperformed
    • Traditional Value sectors such as Industrials, Materials, and Financials got hit hardest
  • Utilities and Staples, two traditional low beta sectors lost the least

 


Style & Sector:

  • In the US, mega-caps outperformed (lost less, unfortunately)
  • Value once again under-performed Growth –mainly due to losses in the Industrials, Materials and Finance sectors
  • Growth and Momentum keep dominating YTD among US stocks
  • Developed international markets slightly outperformed the US but remain in the red for the year
  • 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
  • Technicals have deteriorated massively – sure looks like a bear market or at least a very serious correction
  • The battle may not be between growth and value – feels more like momentum versus reversal
  • 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 starts 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

eweigel@gf-cap.com

___________________________________________________________________________________

 

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

 

Equity Market Insights – Testing Our Faith In Value Investing

Value Investing is Teasing Us

  • Value under-performed Growth last week in the US and abroad – some of this is sector driven
  • Investors are losing faith in Value but should out-perform should the broad market tumble (lower beta)
  • Global equities had a rough week under-performing bonds
  • EM Equities continue under-performing YTD but last week lost the least (-0.3%)
  • Our models have recently turned more cautious about EM stocks despite being much cheaper than their developed market counterparts
  • Our top-rated asset class at the moment is International Developed Markets (EAFE) but last week was not good for this asset (-0.9%)
  • Year-to-date US equities are vastly out-performing international assets – strong home bias fuelled by strong US growth plus an appreciating US dollar
  • Momentum strategies are losing their effectiveness but remain top dog for the year
  • There is no sign of fear among investors – our Risk Aversion Index remains in the Exuberant Zone
  • We remain perplexed by this lack of concern especially as central banks are becoming less stimulative and the possibility of an all-out Global Trade War is rising

 


 

Countries & Region:

  • Poor showing in the last 5 days with Japan being the only major market showing gains
  • Equities under-performed bonds last week
  • Growth out-performed Value over the last 5 trading days in the US as well as internationally
    • Traditional Value sectors such as Materials and Financials gave up some of the gains from prior weeks
  • Energy performed best in the US as well as in global indices

 


Style & Sector:

  • In the US, mega-caps outperformed (lost less, unfortunately)
  • Value once again under-performed Growth –mainly due to losses in the Materials and Finance sectors
  • Growth and Momentum keep dominating YTD among US stocks
  • Asian Developed markets (mostly Japan) boosted international market returns but EAFE was still down for the week
  • EM LATAM recovered last week but trouble continues in the region (Brazil and Argentina)

 


This Coming Week:

  • Risk Aversion continues to surprise on the downside – maybe old historical metrics don’t apply anymore? We don’t agree!
  • Momentum and growth were kings once again last week – can this continue? Will Value only out-perform in a crisis?
  • The battle may not be between growth and value – feels more like momentum versus reversal
  • Tariff wars do not seem to have much of an effect on US stocks – will this persist?
  • Small caps have quietly under-performed large caps over the last 3 months – has anybody noticed? YTD they are still ahead but barely
  • Will EM equities recover? Seems to be all about the direction of the US dollar at the moment

 


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

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

___________________________________________________________________________________

 

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

 

Equity Market Insights – Just When We Thought That Value Was Dead

Just When We Thought That Value Was Dead

  • Global equities once again out-performed bonds over the last 5 trading days
  • Developed Market International Equities provided the best returns last week aided by a nearly 4% return to Japanese equities
  • EM equities, while still on a downtrend, recovered somewhat last week (up 1.9%) but remain down nearly 9% for the year
  • Our models have recently turned more cautious about EM stocks despite being much cheaper than their developed market counterparts
  • Our top-rated asset class at the moment is International Developed Markets (EAFE)
  • Year-to-date US equities are vastly out-performing international assets – strong home bias fuelled by strong US growth plus an appreciating US dollar
  • Value outperformed Growth last week in the US and abroad – some of this is sector driven but we are starting to see signs of a quiet sector rotation going on in the market
  • Momentum strategies are losing their effectiveness but remain top dog for the year
  • There is no sign of fear among investors – our Risk Aversion Index remains in the Exuberant Zone
  • We remain perplexed by this lack of concern especially as central banks are becoming less stimulative and the possibility of an all-out Global Trade War is rising

 


 

Countries & Region:

  • Great last 5 days for global equities with Japan leading the pack
  • Equities vastly out-performed bonds last week
  • International equities and Emerging markets outperformed US equities
  • Growth under-performed Value over the last 5 trading days
  • Traditional Value sectors such as Materials and Financials made a comeback
  • Utilities were the only sector in the red

Style & Sector:

  • In the US, mega-caps outperformed
  • Value for once out-performed Growth –mainly due to a recovery of the Materials and Finance sectors
  • Growth and Momentum keep dominating YTD among US stocks but trailed last 5 days
  • Asian Developed markets (mostly Japan) propelled the MSCI EAFE to a 7% return
  • EM LATAM recovered last week but trouble continues in the area (Brazil and Argentina)

 


This Coming Week:

  • Risk Aversion continues to surprise on the downside – maybe old historical metrics don’t apply anymore? We don’t agree!
  • The bull market in US stocks remains intact but we are seeing evidence of some quiet industry rotation
  • The battle may not be between growth and value – feels more like momentum versus reversal
  • Tariff wars do not seem to have much of an effect on US stocks – will this persist? I
  • Small caps have quietly under-performed large caps over the last 3 months – has anybody noticed? YTD it is a different story
  • Will EM equities recover? Seems to be all about the direction of the US dollar at the moment with Argentina and Turkey inflicting further damage
  • Are Chinese equities going to further lose ground or is this temporary? Is the downtrend due to tariffs or domestic growth issues?

 


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

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

___________________________________________________________________________________

 

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

 

Equity Market Insights – Investors Keep Glamorizing Growth Stocks

It’s Growth Over Value Again

  • Global equities once again out-performed bonds over the last 5 trading days
  • US Large Cap Equities outperformed Developed Market International Equities
  • EM equities, while on a downtrend, recovered somewhat last week (up 0.96%) but remain down 7% for the year
  • The recovery of EM as an asset class depends massively on what direction Chinese stocks take, but contagion concerns from the Turkish Lira and Argentinian Peso have increased significantly
  • Year-to-date US equities are vastly out-performing international assets – strong home bias fuelled by strong US growth plus an appreciating US dollar
  • Growth keeps outperforming Value in the US as well as in International markets
  • In the US last week was all about growth and momentum
  • There is no sign of fear among investors – our Risk Aversion Index remains in the Exuberant Zone. We remain perplexed by this lack of concern especially as central banks are becoming less stimulative and the possibility of an all-out Global Trade War is rising

 


Countries & Region:

  • Good week all around for global equities with Australia having recovered from last week’s loss
  • Among sub-asset classes, US Large Cap and Developed International performed the best
  • Equities once gain beat bonds by a handy margin last week
  • Growth outperformed Value over the last 5 trading days
    • Traditional Value sectors such as Staples and Telecom suffered losses
    • Tech has regained its mojo along with Consumer Discretionary
  • Energy stocks keep recovering – tensions in the Strait of Hormuz will provide further support for oil prices

Style & Sector:

  • In the US, mega-caps outperformed
  • Value once again under-performed Growth – a big portion of this differential is due to sector concentration differences
  • Growth and Momentum keep dominating among US stocks
  • Asian Developed markets (mostly Japan) propelled the MSCI EAFE to a 1.5% return
  • EM LATAM continues to struggle with Argentina becoming a concern (never mind Venezuela)

 


This Coming Week:

  • Risk Aversion continues to surprise on the downside – maybe old historical metrics don’t apply anymore? We don’t agree!
  • The bull market in US stocks remains intact with growth out-performing value – we don’t see anything that is going to change this dynamic
  • Tariff wars do not seem to have much of an effect on US stocks – will this persist? I
  • Is small cap outperformance about tariff “protection” or something else. We think that it is mostly about momentum
  • Will EM equities recover? Seems to be all about the direction of the US dollar at the moment with Argentina and Turkey inflicting further damage
  • Are Chinese equities going to further lose ground or is this temporary? Is the downtrend due to tariffs or domestic growth issues?
  • Not much in the way of important earnings in the US

 


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

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

___________________________________________________________________________________

 

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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