“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

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

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

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

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