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Tag Archives: Value

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

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 – Strong Signs of Sector and Style Rotation

It’s Happening- Signs of Sector and Style Rotation

  • Value sectors are gaining momentum while Growth sectors such as Tech is losing steam quickly
  • Similarly, strategies such as low volatility are gaining ground at the expense of pure momentum strategies
  • The last month has been brutal for equity investors but some signs of stability have emerged
    • Higher rates contributed to this as well as slower expected global growth due to an escalation of tariffs
  • YTD US large and small caps are in positive territory
    • The S&P 500 is up 5.7% for the year while the Russell 2000 is up a meager 1.9%
    • International strategies have underperformed due both to local market returns and a strong USD

Countries & Region:

  • The carnage continues among Chinese stocks
  • Commodity indices took a beating last week (due to oil primarily) while the Real Estate market kept recovering
  • In the US Value out-performed Value over the last 5 trading by over 40 bp
  • In international markets Value outperformed Growth by 90 bp
    • Traditional Value sectors such as Utilities and Staples outperformed along with Health Care
  • Health Care and Technology are the two best sectors YTD but Tech has been losing momentum

 

Style & Sector:

  • In the US, we saw a strong size effect last week with mega-caps outperforming
  • Value once again out-performed Growth as the Utilities, Health Care and Real Estate performed well
  • Growth and Momentum keep dominating YTD among US stocks but the lead is shrinking
  • Developed international markets were flat last week but EM equities took yet another hit
  • EM LATAM continues extremely volatile and driven by politics

This Coming Week:

  • Risk Aversion should stay high and we expect choppy markets this coming week again
  • Equity Technicals have deteriorated but have recovered from the ugliness of prior weeks
  • 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
  • Will EM equities recover? Seems to be all about the direction of the US dollar at the moment. Pretty beat up despite stronger fundamentals
  • REITS have performed extremely well and are YTD only slightly behind US equities
  • 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

___________________________________________________________________________________

 

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 – Testing Our Faith In Value Investing

Value Investing is Teasing Us

  • Value under-performed Growth last week in the US and abroad – some of this is sector driven
  • Investors are losing faith in Value but should out-perform should the broad market tumble (lower beta)
  • Global equities had a rough week under-performing bonds
  • EM Equities continue under-performing YTD but last week lost the least (-0.3%)
  • Our models have recently turned more cautious about EM stocks despite being much cheaper than their developed market counterparts
  • Our top-rated asset class at the moment is International Developed Markets (EAFE) but last week was not good for this asset (-0.9%)
  • Year-to-date US equities are vastly out-performing international assets – strong home bias fuelled by strong US growth plus an appreciating US dollar
  • Momentum strategies are losing their effectiveness but remain top dog for the year
  • 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:

  • Poor showing in the last 5 days with Japan being the only major market showing gains
  • Equities under-performed bonds last week
  • Growth out-performed Value over the last 5 trading days in the US as well as internationally
    • Traditional Value sectors such as Materials and Financials gave up some of the gains from prior weeks
  • Energy performed best in the US as well as in global indices

 

Style & Sector:

  • In the US, mega-caps outperformed (lost less, unfortunately)
  • Value once again under-performed Growth –mainly due to losses in the Materials and Finance sectors
  • Growth and Momentum keep dominating YTD among US stocks
  • Asian Developed markets (mostly Japan) boosted international market returns but EAFE was still down for the week
  • EM LATAM recovered last week but trouble continues in the region (Brazil and Argentina)

 

This Coming Week:

  • Risk Aversion continues to surprise on the downside – maybe old historical metrics don’t apply anymore? We don’t agree!
  • Momentum and growth were kings once again last week – can this continue? Will Value only out-perform in a crisis?
  • The battle may not be between growth and value – feels more like momentum versus reversal
  • Tariff wars do not seem to have much of an effect on US stocks – will this persist?
  • Small caps have quietly under-performed large caps over the last 3 months – has anybody noticed? YTD they are still ahead but barely
  • Will EM equities recover? Seems to be all about the direction of the US dollar at the moment

 

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

 

Equity Market Insights – Just When We Thought That Value Was Dead

Just When We Thought That Value Was Dead

  • Global equities once again out-performed bonds over the last 5 trading days
  • Developed Market International Equities provided the best returns last week aided by a nearly 4% return to Japanese equities
  • EM equities, while still on a downtrend, recovered somewhat last week (up 1.9%) but remain down nearly 9% for the year
  • Our models have recently turned more cautious about EM stocks despite being much cheaper than their developed market counterparts
  • Our top-rated asset class at the moment is International Developed Markets (EAFE)
  • Year-to-date US equities are vastly out-performing international assets – strong home bias fuelled by strong US growth plus an appreciating US dollar
  • Value outperformed Growth last week in the US and abroad – some of this is sector driven but we are starting to see signs of a quiet sector rotation going on in the market
  • Momentum strategies are losing their effectiveness but remain top dog for the year
  • 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:

  • Great last 5 days for global equities with Japan leading the pack
  • Equities vastly out-performed bonds last week
  • International equities and Emerging markets outperformed US equities
  • Growth under-performed Value over the last 5 trading days
  • Traditional Value sectors such as Materials and Financials made a comeback
  • Utilities were the only sector in the red

Style & Sector:

  • In the US, mega-caps outperformed
  • Value for once out-performed Growth –mainly due to a recovery of the Materials and Finance sectors
  • Growth and Momentum keep dominating YTD among US stocks but trailed last 5 days
  • Asian Developed markets (mostly Japan) propelled the MSCI EAFE to a 7% return
  • EM LATAM recovered last week but trouble continues in the area (Brazil and Argentina)

 

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 but we are seeing evidence of some quiet industry rotation
  • The battle may not be between growth and value – feels more like momentum versus reversal
  • Tariff wars do not seem to have much of an effect on US stocks – will this persist? I
  • Small caps have quietly under-performed large caps over the last 3 months – has anybody noticed? YTD it is a different story
  • 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?

 

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

 

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