Growth loses its edge as Momentum reverses

The last month has been brutal for equity investors
- Higher rates contributed to this as well as slower expected global growth due to an escalation of tariffs
- 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 0.2% for the year while the Russell 2000 is down 2%
- International strategies have underperformed both in local market returns and a strong USD

Countries & Region:

The carnage continues –US growth stocks took a huge pounding last week
Commodity indices took a beating last week (due to oil primarily) while the Real Estate market kept recovering
In the US Value out-performed Growth over the last 5 trading by over 130 bp
In international markets Value and Growth performed in line with each other
- Traditional Value sectors such as Utilities and Staples outperformed along with Health Care
Technology and Energy were the two largest losers last week

In the US, we saw a strong size effect last week with mega-caps under-performing
Value once again out-performed Growth as the Utilities, Health Care and Real Estate performed well
The Momentum trade has gone in reverse and Growth Stocks are key losers but remain ahead YTD
Developed international markets were down the least last week but remain down 10% 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 over half of our US universe in is a Down Trend Phase
Tax loss selling is likely to intensify in the next few weeks
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.
REITS have performed extremely well and are YTD our best performing asset class
Q3 reporting is heavy in the US – looking for commentary on tariffs, slowing growth, and inflationary pressures

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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