Asset Allocation Insights – It was a bad week for all of us, Mr. President

Weekly Asset Allocation Highlights

President Trump wasn’t the only one having a bad week – is this a Fake Correction?
Cash is king once again but our risk aversion index is not picking up any fear
US assets lost less last week if that is any consolation
International equities lost the most value last week
A 60/40 mix of purely US assets out-performed a global version once again
Lower risk multi-asset strategies out-performed last week and are ahead in the last month

Currencies:

The USD was range bound last week but continues in a technical Up Trend phase
Within EM currencies the pattern was mixed
- The Rand continued depreciating while the Brazilian Real regained some ground versus the USD
Within the major currencies, the yen outperformed
The Yuan has stabilized after a period of depreciation but remains volatile within the “official” range

Commodities:

Grains are getting whipsawed by trade war on/off issues
- Corn and soybeans continue being most at risk but regained some ground last week while Wheat continues deteriorating
Oil is also getting whipsawed by political tensions – down over 3% last week after several up weeks
Gold and Silver lost more ground last week and the trend is down especially as ST interest rates keep climbing higher

This Coming Week:

Is cash the new King?
- Bonds and stocks are over-valued but growth still holding up which is positive for stocks but for how long?
- We still prefer risky assets but are lowering risk at the portfolio level.
Are political issues in Washington of any concern to markets? Our risk aversion index is not picking up any concern at the moment.
The strong USD keeps crushing investors in international assets but should be losing some momentum.
International equities keep losing ground to US stocks despite superior fundamentals – becoming the contrarian play of 2018
EM equities, in particular, are taking a huge hit both on the asset side as well as currency
- China has a lot to do with this given its weight in the MSCI index (30%)
Growth is outperforming Value YTD but things may be turning around especially if interest rates remain range bound
Global Tech has performed well this year but short-term it is in a break Down phase. More bad news to come or buy the dip? We are holding steady, not buying more.
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?

To read our full weekly report please click here

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

___________________________________________________________________________________

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Asset Allocation Insights – Rewarding Risk Takers

Weekly Asset Allocation Highlights

Equities had again a big week last week as the market focused on growth again
US assets once again dominated non-US assets as the US dollar regained some lost ground
US REITS have continued their comeback after falling apart earlier in the year
Commodity index composition is playing a big role as divergences among commodities are accentuated
A 60/40 mix of purely US assets slightly out-performed a global version
Higher risk multi-asset strategies out-performed last week

Currencies:

The USD was flat last week
- Down against developed market currencies but up against em currencies
Within EM currencies the pattern was mixed
- The Rand depreciated over 2% while Rubble and Brazilian Real continued in a downtrend
Among the major currencies, the US dollar lost the most ground versus the Swiss Franc
The Yuan has stabilized after a period of depreciation but remains volatile within the “official” range

Commodities:

Grains are getting whipsawed by trade war on/off issues
- Corn and soybeans continue being most at risk
Oil is also getting whipsawed by political tensions but had an up week due to smaller inventories in the US, robust Chinese demand and output curbs in Iran
Gold and Silver lost more ground last week and the trend is down especially as ST interest rates keep climbing higher
The large fall in coffee prices last week was again blamed on the falling Brazilian real

This Coming Week:

Still watching the USD – crushing investors in international assets but should be losing some momentum
International equities keep losing ground to US stocks despite superior fundamentals
EM equities, in particular, are taking a huge hit both on the asset side as well as currency
- China has a lot to do with this given its weight in the MSCI index (30%)
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?
Macro Events: Manufacturing (JP, UK, Germany, US), Trade Balance (US, China), lots of Fed Governor Speeches

To read our full weekly report please click here

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

___________________________________________________________________________________

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Equity Market Insights – Investors Keep Glamorizing Growth Stocks

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

Style & Sector:

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)

This Coming Week:

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

___________________________________________________________________________________

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Asset Allocation Insights -Rewarding Growth Assets

Weekly Asset Allocation Highlights

Equities had a big week last week as the market focused on growth again
International assets dominated US assets as the US dollar lost some ground
EM stocks, in particular, had a good week, up 2.7%. Very little was currency related
European developed market equities also had a big up week (2.5%)
REITS had been slowly recuperating but last week they suffered a setback
- Their behavior has recently become more aligned/correlated with equity markets so the poor performance comes as a surprise
A 60/40 mix of purely US assets vastly under-performed a global version
Higher risk multi-asset strategies out-performed last week

Currencies:

The USD lost some strength last week
Within EM currencies the pattern was mixed
- The Rand appreciated over 2% but the real lost close to 5%
The Rubble continues imploding despite a jump in oil prices
Among the major currencies, the US dollar lost the most ground versus the Euro followed by the Pound
The Yuan has stabilized after a period of depreciation but remains volatile within the “official” range

Commodities:

Grains are getting whipsawed by trade war on/off issues
- Corn and soybeans continue being most at risk
Oil is also getting whipsawed by political tensions but had a big up week due to smaller inventories in the US, robust Chinese demand and output curbs in Iran
Gold and Silver recovered a bit last week but the trend is down especially as ST interest rates keep climbing higher
The large fall in coffee prices last week was blamed on the falling Brazilian real – expect a reversal this week

This Coming Week:

Watching the USD – crushing investors in international assets but should be losing some momentum
International equities keep losing ground to US stocks despite superior fundamentals
EM equities, in particular, are taking a huge hit both on the asset side as well as currency
- China has a lot to do with this given its weight in the MSCI index (30%)
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?
Macro Events: Case-Shiller, US GDP, Japanese & German Inflation, rig count in US, Chinese PMI

To read our full weekly report please click here

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

___________________________________________________________________________________

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

The Bull Market For US Stocks Remains Alive But What About Internationally?

Weekly Equity Market Highlights

Global equities out-performed bonds over the last 5 trading days but the big story is the effect of the US Dollar on international asset class performance
EM equities, while on a downtrend, recovered somewhat last week (up 2.6%) but remain down 8% for the year
The recovery of EM as an asset class depends massively on what direction Chinese stocks take – China carries a 30% weight in the MSCI EM index
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, but last week the margin was only 10 bp for the Russell 3000
In the US last week was all about market cap – the smaller the cap the better
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 with Australia being the only down market
China recovered nicely but remains in a downtrend for the year
EM equities have been on a downtrend this year but got a reprieve last week – up 2.6%
Lower beta sectors under-performed last week giving up some of the gains from the previous week
Energy stocks keep getting whipsawed but had the best weekly performance – up 2.5%

Style & Sector:

In the US, small cap won big last week while low vol and yield strategies under-performed
Value and Growth had inline performance but YTD the gap remains quite wide in favor of Growth
EM and International Developed equities out-performed US strategies – big US dollar effect
EM LATAM continues to struggle with Argentina becoming a concern (never mind Venezuela)

This Coming Week:

Risk Aversion – expect the RAI to jump into the Neutral Zone
- Investors keep under-pricing risk
Will US stocks keep leaping ahead of the rest of the world? Is this just dependent on the USD?
Tariff wars do not seem to have much of an effect on US stocks – will this persist even as Trade negotiations stall?
Will EM equities recover? Seems to be all about the direction of China and the the US dollar at the moment
Are Chinese equities going to further lose ground or is this temporary? Is the down trend due to tariffs or domestic growth issues?

To read our weekly report including style factor breakdowns please click here

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

___________________________________________________________________________________

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Asset Allocation Insights – The US Dollar is Killing my Best Ideas

Weekly Asset Allocation Highlights

The out-performance of domestic assets continued last week
A 60/40 mix of purely US assets vastly out-performed a global version
REITS had been slowly recuperating but last week they really took off
- Their behavior has recently become more aligned/correlated with equity markets
International stocks continue under-performing despite cheaper valuations
- EAFE in local currency is outperforming by 3.33% YTD
- EM in local currency is outperforming by 5.13% YTD

Currencies:

The USD keeps chugging along notching weekly wins
EM currencies continue their pattern of depreciation
The biggest loser was the SA Rand – concerns over slower economic growth was a driver as well as contagion from the Turkish Lira
The rubble has stabilized but for how long?
The YEN was up slightly last week as monetary policy is likely to normalize soon in Japan

Commodities:

Grains are getting whipsawed by trade war on/off issues
Oil is also getting whipsawed by political tensions between the US and Iran – technicals are deteriorating
Gold and Silver continue a down-trend with little sign of relief especially as ST interest rates keep climbing higher
Lumber prices have become incredibly volatile and subject to trade issues between CA and the US

This Coming Week:

Watching the USD – crushing investors in international assets
International equities keep losing ground to US stocks despite superior fundamentals
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?

To read our full weekly report please click here

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

___________________________________________________________________________________

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Yikes – The Asset Class with the Best Long-Term Prospects is Imploding

Weekly Equity Market Highlights

Global equities under-performed bonds by a wide margin over the last 5 trading days
EM equities, in particular, are taking a huge hit – down almost 6% in the last 5 days
We rate EM equities as having the best long-term prospects but yikes, this hurts
Chinese stocks are imploding – is this all about a trade war or more significant trade issues?
Year-to-date US equities are vastly out-performing international assets – strong home bias plus an appreciating US dollar
Earnings season in the US is almost over – a good season was had by most
Value lost less than Growth in the US last week – is that out-performance?
Low volatility and high yield had gained last week but value indices were down

Countries & Region:

Tough week all around with the US losing the least
EM equities have been on a downward trend this year and it got worse this week with the index down 5.3%
China’s equity market continues to be very volatile. Trade war jitters have had a much larger effect on Chinese stocks – stocks were down over 6% in the last 5 days
Global sectors had losses except for Utilities and Staples – a tough week overall
Energy stocks keep getting whipsawed by the commodity

Style & Sector:

In the US, low vol and dividend yield were winners over the last 5 trading days
The “Value” comeback seems highly dependent on the path of interest rates
- When people worry about rising rates “value” stocks take a hit, when they don’t they do well
Momentum took a hit last week – this style is quickly losing steam but still remains top dog for 2018
EM and International Developed equities continue their down trend
A big factor in relative performance rankings is the direction of the US dollar

This Coming Week:

Risk Aversion – expect the RAI to jump into the Neutral Zone
- Investors keep under-pricing risk
Will value only outperform growth when interest rates in the US drop?
- Will EM equities recover? The Turkey currency crisis merits some attention. Watch out for contagion effects
Are Chinese equities going to implode or is this temporary? Is the down trend due to tariffs or domestic growth issues?

To read our weekly report including style factor breakdowns please click here

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

___________________________________________________________________________________

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Asset Allocation Insights – Domestic Assets Keep Outperforming

Weekly Asset Allocation Highlights

The out-performance of domestic assets continued last week
A 60/40 mix of purely US assets vastly out-performed a global version
US small cap stocks had an up week as well as US bonds
REITS had been recuperating but last week was a setback despite steady US rates
International stocks continue under-performing despite cheaper valuations

Currencies:

The USD keeps chugging along notching weekly wins
EM currencies continue their pattern of depreciation
The rubble had an especially tough week as further US sanctions are taking a bite
Among the majors, sterling took the biggest hit despite an increase in ST rates
Second big down week in a row for pound

Commodities:

Grains are getting whipsawed despite presidential assurances of price supports
Oil is also getting whipsawed by political tensions between the US and Iran
Gold and Silver continue a downtrend with little sign of relief especially as ST interest rates keep climbing higher
Lumber prices are breaking down due to over-valuation and a possible dispute with Canada over newly imposed tariffs

This Coming Week:

Q2 earnings in the US almost done – good season for most, good US growth
Watching the USD – huge effect on international markets especially
International equities keep losing ground to US stocks despite superior fundamentals
Growth keeps outperforming Value – turning point might not happen unless expectations for rising rates stabilize
Watching agricultural commodities for trade war effects

To read our full weekly report please click here

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

___________________________________________________________________________________

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Weekly Equity Market Highlights – Where is the Bear?

Weekly Equity Market Highlights

Global equities outperformed bonds by a wide margin over the last 5 trading days
Where is the Bear? We know it is lurking behind the scenes but conditions still favor equities over bonds
Emerging market equities were the best-performing equity sub-asset class – a reversal from some dismal prior weeks
Year-to-date US equities are vastly out-performing international assets – strong home bias plus an appreciating US dollar
Earnings season in the US is almost over – a good season was had by most
Growth keeps outperforming value but most of the real action is at the sector level and highly dependant on the interest rate environment
China’s equity market continues to be very volatile – Trade war jitters have had a much larger effect on Chinese stocks

Countries & Region:

Large caps dominated in the last week with the S&P 500 up 1%
EM equities have been on a downtrend this year but last week was up 1.1% – part of it was currency related
China’s equity market continues to be very volatile. Trade war jitters have had a much larger effect on Chinese stocks
Telecom had a nice recovery last week with the global sector index up 2.7% – people continue searching for yield
Tech resumed its upward march while Energy stocks keep getting whipsawed by the commodity

Style & Sector:

In the US, momentum and growth keep leaping ahead
The “Value” comeback seems highly dependent on the path of interest rates
- When people worry about rising rates “value” stocks take a hit, when they don’t they do well
Size or market cap behaved perversely – the larger the cap the better the performance
EM equities out-performed last week with Asia doing particularly well
LATAM gave back some of the gains from last week
A big factor in relative performance rankings is the direction of the US dollar

This Coming Week:

Risk Aversion – expect the RAI to jump into the Neutral Zone – Investors keep under-pricing risk
Market Internals – expected to remain “balanced” -the technicals do not support a bear market
Will growth keep outperforming value? Much depends on the direction of interest rates
Will EM equities recover? The Turkey currency crisis merits some attention. Watch out for contagion effects
More tariffs on the horizon? Will US stocks react to this? Most of the effect thus far has been on non-US stocks

To read our weekly report including style factor breakdowns please click here

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

___________________________________________________________________________________

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Asset Allocation Weekly Insights

Weekly Asset Allocation Highlights

The out-performance of domestic assets continued last week
A 60/40 mix of purely US assets vastly out-performed a global version
US large and small cap stocks had an up week but REITS were the standout performer
REITS have been all year moving along with rates but recently their correlation to equities has increased
EM stocks continue having a rough year

Currencies:

The USD keeps chugging along notching small weekly wins
EM currencies continue their pattern of depreciation
Among the majors, sterling took the biggest hit despite an increase in ST rates
The yuan continues depreciating in a controlled fashion

Commodities:

A week of recovery for grains as President Trump has offered assistance
Wheat is least affected by global trade fears and has continued on a solid Up Trend
Gold and Silver continue a downtrend with little sign of relief especially as ST interest rates keep climbing higher
Lumber prices are breaking down due to over-valuation and a possible dispute with Canada over newly imposed tariffs

This Coming Week:

Q2 earnings in the US almost done – above average earnings season
Watching the USD – expecting some depreciation as other central banks start their normalization plans
Expecting momentum as a factor to start losing effectiveness – last week saw a resurgence of value and yield-oriented strategies
In the US the key macro number to watch is the CPI – expect a further slow rise
GDP releases in Japan and England, in China we are expecting Trade Balance numbers as well as CPI

To read our full weekly report please click here

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

___________________________________________________________________________________

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Insights That Matter

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It’s Growth Over Value Again

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To read our weekly report including style factor breakdowns please click here

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