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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

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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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