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

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)

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

___________________________________________________________________________________

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required