Asset Allocation Insights – A Dicey Week Gets Investors to Pay Attention to Risk

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

Commodities:

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

This Coming Week:

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

The biggest issue for investors is lack of a reasonable hedge to equity risk

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 – Commodities Roar Back

Commodities Roar Back

Risky assets suffered large losses last week with EM stocks taking the biggest beating
Fixed income also experienced losses as interest rates globally spiked up
Only Commodities as an asset class experienced positive returns
Within equities, US large cap lost the least as Value strategies actually showed slight gains
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 regained lost strength last week
The Brazilian Real spiked up as pro-business President is expected to be elected
EM currencies continue getting pounded with the Rand taking the biggest beating as SA enters a recession
As central banks normalize their policies expect enhanced volatility as market participants balance interest rate differentials with economic growth dynamics
The Yuan has stabilized after a period of depreciation – authorities have refrained so far from using a weaker currency to fight tariffs

Commodities:

Best week this year for commodity prices – potentially a wakeup call as investor update their inflationary expectations
Sugar and coffee prices were up the most boosted by the appreciation of the Brazilian Real
Grain prices recovered from previous week lows but until tariffs with China are not agreed to we should expect to see huge volatility
Oil keeps marching higher as economic growth remains robust and sanctions against Iran take a bite out of supplies
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

This Coming Week:

Risky assets keep outperforming YTD but last week was a down week across the board except for commodities
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 markets will calm down and that risky assets will recover this week
We are also watching out for any strong jump in inflationary expectations
- An important economic number to watch this week is US CPI on Thursday
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
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
What will make investors price risk more in line with history?
- A growth scare in the US, maybe? A real inflation scare?
The biggest issue for investors is lack of a reasonable hedge to equity risk

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 – International Assets Stage a Comeback

Weekly Asset Allocation Highlights

Risky assets continued recovering last week with International assets out-performing domestic assets
Developed market equities did best this week with EAFE out-performing the US
EM equity and bonds recovered from pretty poor momentum – currency helped last week for a change
A 60/40 mix of purely US assets under-performed a global version but remains vastly ahead YTD
In general, higher risk multi-asset strategies out-performed last week and remain ahead YTD

Currencies:

The USD gave up ground last week – the second week in a row
Foreign central banks are reading their way toward policy normalization
Within EM currencies the pattern was bullish with wide-ranging appreciation versus the USD
- The Rand and Real recovered nicely
Among the major currencies, resource-oriented currencies such as the AUD and CAD appreciated the most
The Yuan has stabilized after a period of depreciation – authorities have refrained so far from using a weaker currency to fight tariffs

Commodities:

Lumber suffered a disastrous week as conditions of over-valuation are being worked through
Grains are getting whipsawed by trade war on/off issues but in general, benefited from the belief that negotiations will take place between China and the US
Coffee recovered along with the Brazilian Real
Oil keeps marching higher as economic growth remains robust and sanctions against Iran take a bite out of supplies
Gold and Silver were stable last week for a change but barring a real crisis continue on a downtrend

This Coming Week:

Risky assets keep outperforming despite political headwinds
The strong USD keeps crushing investors in international assets but should be losing some momentum.
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? Waiting for Impeachment?
Biggest issue for investors is lack of a reasonable hedge to equity risk

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 – The Seesaw Continues But Risky Assets Continue Winning

Weekly Asset Allocation Highlights

Risky assets recovered last week – it seems like every other week we flip around – maybe this week is going to be good for bonds?
Developed market equities did best this week with EAFE out-performing the US
EM equity and bonds recovered from pretty poor momentum – currency helped last week for a change
A 60/40 mix of purely US assets under-performed a global version but remains vastly ahead YTD
In general, higher risk multi-asset strategies out-performed last week and remain ahead YTD

Currencies:

The USD gave up a bit of ground last week
Foreign central banks are reading their way toward policy normalization
Within EM currencies the pattern was mixed – the Rand and Rubble recovered nicely but the Brazilian Real continued its downward slide
Among the major currencies, the euro 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
Coffee also keeps getting pounded by the depreciating Brazilian Real
Oil is also getting whipsawed by political tensions – up a little last week as curbs on Iranian oil take effect
Gold and Silver were stable last week for a change but barring a real crisis continue on a downtrend

This Coming Week:

Are political issues in Washington of any concern to markets? Is the Manafort plea deal the beginning of the end?
The strong USD keeps crushing investors in international assets but should be losing some momentum.
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 – 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

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

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

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

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

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