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Equity Market Highlights – Momentum and Growth Get Mauled

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

Style & Sector:

  • 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

This Coming Week:

  • 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




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