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Asset Allocation Insights – A Reprieve for Equity Investors but Tariffs Loom Large

A Reprieve for Equity Investors but Tariffs Loom Large

  • Equities recovered last week and fixed income only suffered mild losses last week
  • The best performing asset class last week was Emerging Market Equities
  • Multi-asset class investors enjoyed above-average returns due to the spike in equity values
  • Commodities remained volatile and subject to the direction of oil prices
  • Within equities, US large cap ended up over 2% with Value strategies outperforming Growth by 2%
  • A 60/40 mix of purely US assets under-performed a global version but remains vastly ahead YTD


  • The USD slightly appreciated last week after the significant gain it had the week before
  • The South African Rand recovered over 1% as interest rates provide some support for the beleaguered currency
  • The British Pound gained almost 2% as BREXIT negotiations regained momentum and Sterling monetary policy becomes more normalized
  • The Mexican Peso tumbled as a left-leaning new President encounters economic difficulties and political fallout from US immigration policy


  • Commodity indices had a bad week due to the continued downtrend in oil prices
  • Oil prices dropped nearly 7% last week and are down over 15% over the last 20 days
  • On the flipside, grain prices have been recovering since the summer with soybeans, corn and wheat prices all up last week
  • Lumber prices continue being extremely volatile – lumber was up last week almost 10% but remains in a severe downtrend
  • Gold and Silver were stable last week for a change but barring a real crisis continue on a downward trend especially in light of higher short-term interest rates

This Coming Week:

  • Home bias keeps winning as multi-asset strategies with international assets have significantly underperformed
  • The strong USD is partly to blame but we do not see a significant reversal anytime soon as US monetary policy is being normalized
  • We still foresee one further rate hike in the US in December but fixed income market conditions have stabilized
  • 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

To read our full weekly report please click here

Eric J. Weigel

Global Focus Capital LLC



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