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Asset Allocation Insights – International Assets Stage a Comeback

Weekly Asset Allocation Highlights

  • Risky assets continued recovering last week with International assets out-performing domestic assets
  • Developed market equities did best this week with EAFE out-performing the US
  • EM equity and bonds recovered from pretty poor momentum – currency helped last week for a change
  • A 60/40 mix of purely US assets under-performed a global version but remains vastly ahead YTD
  • In general, higher risk multi-asset strategies out-performed last week and remain ahead YTD

Currencies:

  • The USD gave up ground last week – the second week in a row
  • Foreign central banks are reading their way toward policy normalization
  • Within EM currencies the pattern was bullish with wide-ranging appreciation versus the USD
    • The Rand and Real recovered nicely
  • Among the major currencies, resource-oriented currencies such as the AUD and CAD appreciated the most
  • The Yuan has stabilized after a period of depreciation – authorities have refrained so far from using a weaker currency to fight tariffs

Commodities:

  • Lumber suffered a disastrous week as conditions of over-valuation are being worked through
  • Grains are getting whipsawed by trade war on/off issues but in general, benefited from the belief that negotiations will take place between China and the US
  • Coffee recovered along with the Brazilian Real
  • Oil keeps marching higher as economic growth remains robust and sanctions against Iran take a bite out of supplies
  • Gold and Silver were stable last week for a change but barring a real crisis continue on a downtrend

This Coming Week:

  • Risky assets keep outperforming despite political headwinds
  • The strong USD keeps crushing investors in international assets but should be losing some momentum.
  • EM equities, in particular, are taking a huge hit both on the asset side as well as currency
  • Growth is outperforming Value YTD but things may be turning around especially if interest rates remain range bound
  • Gold and Silver are losing their luster – not providing downside hedge and very driven by trends in short-term rates
  • What will make investors price risk more in line with history?
    • A growth scare in the US, maybe? A real inflation scare? Waiting for Impeachment?
  • Biggest issue for investors is lack of a reasonable hedge to equity risk

To read our full weekly report please click here

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

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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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