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Category Archives: Global Macro

Equity Market Insights – The Beat Goes On For Equity Investors

https://gf-cap.com

“Investing is not nearly as difficult as it looks. Successful investing involves doing a few things right and avoiding serious mistakes”

– Jack Bogle

►Equity markets have staged a remarkable recovery after a dismal Q4

►Over the last month, US small caps and EM stocks have performed the best

►Over the last 12 months all major equity asset classes are down with US Large Cap the least and EM the most

►Valuations while more reasonable than 3 months ago are not yet favorable – we may be seeing a reversal from the q4 downdraft, not a fundamental uptrend

►The key for equity markets is global growth and whether we are entering a slowdown or not

Countries & Region:

►A global recovery for most but with large differences in global market performance

►Commodity indices continue their recovery as oil prices firmed up helping resource oriented markets

►In the US Value and Growth performed in line last week, but higher dividend yield stocks really rocked it

►In international markets Value under-performed Growth by a wide margin driven primarily by sector differences

►Globally, Staples and Energy performed best last week while Financials gave back some of the gains from the previous week


Style & Sector:

►In the US, we saw Large Caps  do best

►The size effect in the US was strong (in reverse of expectations)

►Within equity styles, Dividend Yield and Quality strategies resulted in better performance

►The Momentum trade has made a bit of a comeback in 2019 – it’s up 7% YTD

►Latam shot up last week – the index is up 14.7% for the year


This Coming Week:

►Risk Aversion should spring up this week with more earnings in the US

►Equity Technicals have improved to the point that only 13% of stocks remain in the Down Trend Phase

►Political drama in Washington is exacerbating the uncertainty of market participants but investors seem to be in denial thus far in 2019

►Brexit is up for the spring but prospects of passing Parliament are slim. Could we be starring 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 are the best performing major asset class in 2019 after a dismal 2018 – some of it is due to a snap back but we are still underweight small caps

►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

►The price of higher equity returns is discomfort – volatility has been too low in the last few years

►This coming week has huge earnings implications. Lots of companies reporting Q4.

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

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

______________________________________________________________________________

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Asset Allocation Insights – Risky Assets Continue Their Ciomeback


Partying Like it is 2017 Again

►The comeback for holders of risky assets such as equities, real estate, and commodities continues

►EM equities perform the best of our major asset classes – up 2.3% for the week and over 9% over the last 3 months

►Developed international equities also had a huge week – up 1.7% and 5% for 2019 thus far

►Commodity indices also made a nice comeback boosted by higher oil prices – up 9.4% for the year already

►Aggressive, domestically focused multi-asset class strategies out-performed less risky options

►In 2018 lower risk asset allocation strategies   outperformed especially if allocations involved international equities but the story is reversed thus far this year

►Within equities, Growth has slightly under-performed Value in 2019 but over the last year Growth remains solidly ahead

►Over the last year, only Cash and US Reits exhibit positive returns

Currencies:

►The USD is losing some strength as budget discussions in Washington remain unresolved and the Fed has indicated being close to done with rate hikes

►A depreciating USD will boost international asset returns – we expect this effect to persist in 2019

►A big question mark for this coming week is what happens to Brexit (yet again) but sterling is showing strength

►The Yen is now in a Break Out phase as investors remain risk averse and the Yen is usually considered the “safe” trade

►Resource-oriented currencies experienced losses last week relative to the USD despite firmer commodity prices

In general, FX volatility has increased substantially in the last couple of months

Commodities:

►Commodity indices continue in a Down Trend even as oil markets showed continued gains last week

►Grain prices have also continued their upward path from the lows of last summer

►Gold and Silver are in the Break Out phase as investors have flocked to them as a hedge against equity volatility

►However, we still view US Treasuries as the best hedging option for equity risk

This Coming Week:

►While risky assets recovered last week we still think that risk is being shunned at the moment

►While not comfortable, US investors should allocate more money to non-US stocks due to their lower valuations and a depreciating USD

►The strong USD will not persist much stronger as the FED appears close to the end in terms of interest rate hikes

►The Value/Growth discussion is being overshadowed by sector rotation but on a risk-adjusted basis we believe that higher allocations to Value are warranted

►We are also watching out for any jump in inflationary expectations (which have been trending down)

►Tariffs are inflationary and will be reflected in higher consumer prices eventually

►Our biggest concerns revolve around a slowing global economy – The IMF recently lowered 2019 growth numbers to 3.5%

►We still see a risk on/off market this year making it difficult for short-term investors – probably best to extend horizons

►In general, investors seem very pessimistic making contrarian plays interesting from a tactical perspective

__________________________________________________________________________________

To read our full weekly report please click here

ic J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

______________________________________________________________________________

Global Focus Capital
Global Focus Capital

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 – Global Risk Assets Shoot Up Despite Underlying Tension

https://gf-cap.com

 

“Investing is not nearly as difficult as it looks. Successful investing involves doing a few things right and avoiding serious mistakes”

– Jack Bogle

►The seesaw continues for risky assets as small caps take the lead for 2019 but investors feel the tension

►Over the last month, US small caps and EM stocks have made money

►Over the last 12 months, all major equity asset classes are down with US Large Cap the least and EM the most

►Valuations while more reasonable than 3 months ago are not yet favorable – we may be seeing a reversal from the q4 downdraft, not a fundamental uptrend

►The key for equity markets is global growth and whether we are entering a slowdown or not

Countries & Region:

►A global recovery but with large differences in global market performance

►Commodity indices continue their recovery as oil prices firmed up helping resource oriented markets

►In the US Value outperformed Growth last week – higher dividend yield underperformed but the sector effect was dominant as was the quality factor

►In international markets Value out-performed Growth by a smaller margin than in the US

►Financials performed best and Utilities did the worst (barely positive)


Style & Sector:

►In the US, we saw Midcaps do best followed by large caps

►Value performed a bit better than Growth

►Within equity styles, Quality strategies resulted in better performance

►The Momentum trade has made a bit of a comeback in 2019 but the effect is still uncertain

►EM Asia and Latam shot up last week recovering from poor 2018 performance

 


This Coming Week:

►Risk Aversion should spring up this week unless China and the US reach a deal on tariffs

►Equity Technicals have improved to the point that only 17% of stocks remain in the Down Trend Phase

►Political drama in Washington is exacerbating the uncertainty of market participants but investors seem to be in denial thus far in 2019

►Brexit is up for the spring but prospects of passing Parliament are slim. Could we be starring 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 underperformed large caps over the last 3 months but have had a nice a nice recovery in 2019

►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

►The price of higher equity returns is discomfort – volatility has been too low in the last few years

►This coming week has huge earnings implications. Lots of companies reporting Q4.


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

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

______________________________________________________________________________

 

Global Focus Capital

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Asset Allocation Insights – A Relief Rally With No Legs


Breathing a Sigh of Relief For Now

►A huge comeback for holders of risky assets such as equities, real estate,  and commodities

►US small caps perform the best of our major asset classes – up 4.8% for the week but still down 6% over the last 3 months

►REITS also had a huge week after a poor last couple of weeks – up 4.5% and 3.2% for 2019 thus far

►Commodity indices also made a nice comeback boosted by higher oil prices – up 7.5% for the year already

►Aggressive, domestically focused multi-asset class strategies out-performed less risky options

►In 2018 lower risk asset allocation strategies   outperformed especially if allocations involved international equities but the story is reversed thus far this year

►Within equities, Growth has slightly under-performed Value but over the last year Growth remains solidly ahead

►Over the last year, Cash remains the best performing of the major asset classes

Currencies:

►The USD is losing some strength as budget discussions in Washington remain unresolved and the Fed has indicated being close to done with rate hikes

►A depreciating USD will boost international asset returns

►A big question mark for this coming week is what happens to Brexit (Tuesday vote)

►The Yen is now in a Break Out phase as investors remain very risk-averse and the Yen is usually considered the “safe” trade

►Resource-oriented currencies experienced the biggest gains last week relative to the USD as commodity prices have stabilized

►In general, FX volatility has increased substantially in the last couple of months

Commodities:

►Commodity indices continue in a Down Trend even as oil markets showed some nice gains last week

►On the flipside, grain prices went down slightly last week but have recovered from the lows of last summer

►Sugar and coffee prices recovered along with the Brazilian Real – these 2 commodities are very sensitive to the currency

►Gold and Silver are in the Break Out phase as investors have flocked to them as a hedge against equity volatility

►However, we still view US Treasuries as the best hedging option for equity risk

This Coming Week:

►While risky assets recovered last week we still think that risk is being shunned at the moment

►While not comfortable, US investors should allocate more money to non-US stocks due to their lower valuations

►The strong USD will not persist much stronger as the FED appears close to the end in terms of interest rate hikes

►The Value/Growth discussion is being overshadowed by sector rotation but on a risk-adjusted basis we believe that higher allocations to Value are warranted

►We are also watching out for any jump in inflationary expectations (which have been trending down)

►Tariffs are inflationary and will be reflected in higher consumer prices eventually

►Our biggest concerns revolve around blowing out interest rate spreads and a slowing global economy

►Leverage on the balance sheet of companies should be cross-checked for sustainability

►We still see a risk on/off market this year making it difficult for short-term investors – probably best to extend horizons

►In general, investors seem very pessimistic making contrarian plays interesting from a tactical perspective

►In this environment of fear, it is best to allocate capital to specific assets rather than asset classes

__________________________________________________________________________________

To read our full weekly report please click here

ic J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

___________________________________________________________________________________

Global Focus Capital
Global Focus Capital

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 -A well-behaved market that will not last

https://gf-cap.com

 

Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected

– George Soros

  • The seesaw continues for risky assets as small caps take the lead for 2019
  • Over the last month, all major equity categories have lost money
  • Surprisingly, EM stocks have held up the best in this equity correction
  • Valuations while more reasonable than 3 months ago are not that favourable
  • The key for equity markets is growth and whether we are entering a slowdown or not

Countries & Region:

  • A global recovery but with large differences in global market performance
  • Commodity indices recovered last week as oil prices firmed up helping resource oriented markets
  • In the US Value slightly outperformed Growth last week – higher quality and dividend yield also made a difference
  • In international markets Value out-performed Growth by a wider margin than in the US
    • Energy performed best and Tech did the worst (Apple effect)

Style & Sector:

  • In the US, we saw a strong size effect last week with small caps dramatically out-performing
  • Value performed a bit better than Growth
  • Within equity styles, Quality and Div Yield strategies resulted in better performance
  • The Momentum trade has gone in reverse with last year’s biggest loser performing the best thus far in 2019
  • Latam shot up last week recovering from poor 2018 performance and the rise in oil prices

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 65% of stocks in the Down Trend Phase
  • Political drama in Washington is exacerbating the uncertainty of market participants
  • Brexit is up for the spring 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 but had a nice recovery
  • 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

______________________________________________________________________________

 

Global Focus Capital
Global Focus Capital
Global Focus Capital
Global Focus Capital

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Asset Allocation Insights – Bad and Getting Worse for Equity Investors

Investors Shun Equities

  • A slow week with a bit of cheer for equity investors
  • US small caps recover the most – up 1% for the week but still down 21% over the last three months
  • REITS gave back some gains last week (down 1.7%) and are now also in negative territory for 2018
  • Commodity indices remain driven by lower oil prices with no sign of resurgent inflation
  • Aggressive, domestically focused multi-asset class strategies out-performed less risky options
  • YTD lower risk asset allocation strategies have outperformed especially if allocations involved international equities
  • Within equities, Growth slightly under-performed Value but Growth remains solidly ahead for the year
  • Cash remains the best performing of the major asset classes for the year

Currencies:

  • The USD is losing some strength as budget discussions in Washington remain unresolved and the Fed has indicated being close to done with rate hikes
  • A depreciating USD will boost international asset returns
  • The British Pound continued depreciating due to major uncertainty regarding BREXIT early in 2019
  • The Yen is now in a Break Out phase as investors remain very risk-averse and the Yen is usually considered the “safe” trade
  • Resource-oriented currencies experienced the biggest losses last week relative to the USD as commodity prices remain in a Down Trend
  • In general, FX volatility has increased substantially in the last couple of months

Commodities:

  • Commodity indices continue in a Down Trend as oil markets had another down leg
  • On the flipside, grain prices have been recovering since the summer
  • Natural gas prices were down over 8% due to warmer predicted weather and lower levels of fuel switching than anticipated
  • Gold and Silver had good weeks as investors have become more risk averse and the Fed has indicated only 2 more rate hikes for 2019
  • However, we still view US Treasuries as the best hedging option for equity risk

This Coming Week:

  • The year of risk-off continues with little to offer us hope that risky assets will recover soon – there may be a spike in January but risk is being shunned at the moment
  • While not comfortable, US investors should allocate more money to non-US stocks due to their lower valuations
  • The strong USD will not persist much stronger as the FED appears close to the end in terms of interest rate hikes
  • The Value/Growth discussion is being overshadowed by sector rotation but on a risk-adjusted basis we believe that higher allocations to Value are warranted
  • We are also watching out for any jump in inflationary expectations (which have been trending down). Tariffs are inflationary and will be reflected in higher consumer prices eventually
  • EM equities, in particular, are recovering. We still believe that an allocation is warranted. Our biggest concerns revolve around blowing out interest rate spreads and a slowing global economy
  • Leverage on the balance sheet of companies should be cross-checked for sustainability
  • We still see a risk on/off market next year making it difficult for short-term investors – probably best to extend horizons

__________________________________________________________________________________

To read our full weekly report 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 – 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

Asset Allocation Insights – Risk Is Off The Table

Investors Want No Part Of Risk

  • Another tough week for risky assets with no end in sight
  • US small caps take yet another down leg and are now down 7% for the year
  • REITS gave back some gains last week but remain our best key asset class for 2018 – up 4.1%
  • Commodity indices remain driven by lower oil prices with no sign of resurgent inflation
  • Aggressive, domestically focused multi-asset class strategies under-performed less risky options
  • YTD lower risk asset allocation strategies have outperformed especially if the allocations involved international equities
  • Within equities, Growth outperformed Value as Energy and Financials experienced large loses

Currencies:

  • The USD appreciated yet again last week and remains in a significant Up Trend
  • The British Pound continued depreciating due to major uncertainty regarding whether BREXIT will pass Parliament
  • The Yen continues in a Down Trend especially in light of lower economic growth in Japan
  • In general, FX volatility has increased substantially in the last couple of months

Commodities:

  • Commodity indices continue in a Down Trend as oil markets had another down leg
  • On the flipside, grain prices have been recovering since the summer but surprisingly soybeans were down despite increased Chinese purchases
  • Natural gas prices were down over 16% due to warmer predicted weather and lower levels of fuel switching than anticipated
  • Gold and Silver were slightly down last week but their technical picture has improved recently as risky assets continue cratering
    • We still view US Treasuries as best hedging option for stocks

This Coming Week:

  • The year of risk-off continues with little to offer us hope that risky assets will recover soon
  • While not comfortable, US investors should allocate more money to non-US stocks due to their lower valuations
  • The strong USD will not persist much stronger as the FED appears close to the end in terms of interest rate hikes
  • The Value/Growth discussion is being overshadowed by sector rotation but on a risk-adjusted basis we believe that higher allocations to Value are warranted
  • We are also watching out for any jump in inflationary expectations (which have been trending down)
    • Tariffs are inflationary and will be reflected in higher consumer prices eventually
  • EM equities, in particular, are recovering but will end up in the red this year
    • We still believe that an allocation is warranted
    • Our biggest concerns revolve around blowing out interest rate spreads and a slowing global economy
  • Leverage on the balance sheet of companies should be cross-checked for sustainability
  • We still see a risk on/off market next year making it difficult for short-term investors – probably best to extend horizons

__________________________________________________________________________________

To read our full weekly report 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 – 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

 

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