From Bear Market to Sector Rotation – It’s All a Bit Confusing Now!

This year has been a roller coaster for global equity investors. From the weak start to the year to the recovery in early March it has left investors with more questions than answers. Are we in a bear market? Are we just pausing until global growth resumes?

Lots of questions and few answers, but maybe we can distill some useful information from the recent price action of global equity markets. In a world where the headlines revolve around broad market indices such as the S&P 500 or the Nikkei 225 much is left unexplored.

In this note we look at the technical characteristics of our global equity sample (13,000 stocks) for clues as to what may be going on behind the scenes. We search the readings from our Technical Stage Model for clues. For further details on our methodology please read our post Getting All Technical

What we find is great investor indecision – over 40% of stocks in our global sample reside in the Improving Stage.

While historically one would expect these stocks to keep on moving up higher to the Break Out Stage there is also a non-trivial probability of regressing to the Down Turn Stage hence our characterization of the Improving Stage as indecisive.

We also find a strong rotation away from sectors and equity styles that out-performed last year toward much maligned resource-oriented sectors and countries.

Is the current technical picture more consistent with a Bear Market or an ongoing strong sector rotation toward out-of-favor sectors? Will the recovery in resource- oriented sectors last?

Click here to download the report:Strong Sector Rotation or a Bear Market?

Sincerely,

Eric J. Weigel
Managing Partner and Founder of Global Focus Capital LLC

eweigel@gf-cap.com

Can This Russian Bear Learn To Samba?

Last week we wrote about the amazing year to date performance of the Brazilian equity market. Despite all the awful headlines and negative investor sentiment the Brazilian market was up over 20% and last week it went up a further 4%.

A similarly widely disliked equity market fraught with negative headlines having a great start to the year is Russia.

Russian equities were up 2.5% last week and in 2016 they are up about 11%. Not bad for a market that like Brazil comes with lots and lots of baggage.

All resource-oriented equity markets have benefited from the resurgence of commodities and both economies are expected to contract further in 2016, but Russia and Brazil are not cut from the same cloth.

There are at least three key differences that investors should note before lumping these emerging markets together:

Economic Sector Composition
Fundamental Drivers of Return
Value Add of Top-Down versus Bottom-Up Implementation Approaches

Click to read the full report Can This Russian Bear Learn To Samba?

Sincerely,

Eric J. Weigel
Managing Partner of Global Focus Capital LLC

eweigel@gf-cap.com

Looking for a Second Income? Take a Look at Dividend Stocks.

How about adding dividend stocks to your portfolio to complete the job that bonds can’t at the moment?

For some ideas regarding the difference between high yield stocks and dividend growth equities take a look at our latest white paper – Click here to download the report: “Equity Income For the Yield Starved Investor”

Some of our report conclusions:

►High Dividend Yield stocks tend to be inexpensive but lacking in growth and historically have been members of distressed categories

►High Dividend Growth stocks are only slightly more expensive than their lower growth peers but exhibit much higher rates of prospective earnings growth as well as superior profitability

►Our overall conclusion is that High Dividend Growth stocks are not materially over-valued versus lower growth companies and that there is an adequate margin of safety to fund dividends out of earnings growth

►We strongly suggest employing dividend growth strategies as the preferred way to implement income generation programs

►We also believe that significant dividend growth opportunities exist outside of the major equity markets so a global perspective is recommended

►Finally, priority should be given to the analysis of company fundamentals in terms of their ability to increase dividends in a financially responsible manner while also allowing the investor a margin of principal (price) protection

Sincerely,

Eric J. Weigel
Managing Partner and Founder of Global Focus Capital LLC

eweigel@gf-cap.com

Is Loving My Smart Beta All That Wrong?

Investors are madly in love with “smart” beta strategies and asset managers offering such products have been shown the love. It was almost inevitable that as active management has gotten a bad rap, investors would flock to the next great thing. Just like in the comedy “If Loving You is Wrong” by Tyler Perry, there is the potential for significant turbulence ahead when falling head over heels in love with these “smart” beta strategies.

In this free report, we’ll look at the different factors that comprise smart beta strategies and why investing based on one factor exclusively may not be the best option available to today’s investor. Click here to download free report: “Is Loving My Smart Beta All That Wrong“

Category Archives: Equity Strategies