Investors Pay Attention To Risk Again

Risky assets suffered large losses last week with the exception of REITS up over 3%
Fixed income also experienced losses as interest rates globally moved up yet again
In general, while the losses paled in comparison to the previous week, multi-asset investors continued losing capital
Within equities, US large cap ended up flat with Value strategies outperforming Growth by 1.3%
A 60/40 mix of purely US assets out-performed a global version and remains vastly ahead YTD
In general, higher risk multi-asset strategies under-performed last week but remain ahead YTD

Currencies:

The USD once again regained lost strength last week
The Brazilian Real further recovered as a pro-business President is on deck
EM currencies were mixed with the Peso and Yuan losing additional ground
The British Pound lost about 1.5% last week as Brexit negotiations continue without a clear outcome
The Yuan avoided being labeled a currency manipulator by the US Treasury but the trend is for further depreciation

Commodity indices gave back some of the gains from the previous week as oil prices retreated
Grain prices also retreated further but prices have stabilized from the bottom hit in the summer
Sugar and Coffee showed the most gains aided by an appreciating Brazilian Real
Gold and Silver were stable last week for a change but barring a real crisis continue on a downtrend especially in light of higher short-term interest rates

US risky assets keep outperforming YTD but last week was a down week across the board except for REITS
The worst performing asset categories are international equities with EM down almost 15% YTD
The critical variable to watch for this week is the US 10 Year Note – another spike up and risky assets will be under great stress
Our view is that volatility is here to stay
- In fact, we see current asset class volatility as normal
We are also watching out for any strong jump in inflationary expectations
- Tariffs are inflationary and will be reflected in higher consumer prices eventually
EM equities, in particular, are taking a huge hit both on the asset side as well as currency – this is turning out to be a lost year for EM investors
- We still believe that an allocation is warranted
Value dramatically outperformed Growth last week and we are seeing faint signs of industry rotation toward value sectors
- The Momentum trade while still ahead YTD is quickly losing strength
Earning season in the US is back with Amazon, Microsoft, and Google all reporting

To read our full weekly report please click here

Eric J. Weigel

Global Focus Capital LLC

___________________________________________________________________________________

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required