Utilities are the new cool kids on the block
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- The seesaw continues for risky assets but utilities emerge as the standout performer
- Last week was particularly bad as equity markets took a deep dive again
- 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 0.3% for the year while the Russell 2000 is down 4.6%
- International strategies have underperformed both in local market returns and a strong USD
Countries & Region:
- The carnage continues –all major global markets took a nosedive with Germany suffering the most
- Commodity indices recovered last week as oil prices moved marginally up
- REITS continue to be the standout performer – up 1.6% last week and over 6% for the year
- In the US Value and Growth both got pounded last week (down 3.8%)
- In international markets, Growth outperformed Value last week
- Utilities continue delivering – only equity sector up last week
Style & Sector:
- In the US, we saw a strong size effect last week with small caps dramatically under-performing
- Value performed as badly as Growth despite Utilities being up for the week
- Within equity styles, Low Vol and Div Yield strategies resulted in smaller losses
- The Momentum trade has gone in reverse and Growth Stocks are key losers but remain ahead YTD
- Emerging markets outperformed Developed international markets but remain still 13% down for the year
- EM LATAM continues extremely volatile and was down 2% last week
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
- The exception are Utilities where 68% of our stocks are in an Up Trend
- The political drama in Washington is exacerbating the uncertainty of market participants
- Brexit is up this week – will the Parliament vote for it?
- 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 underperformed 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
- Our models still favor a reduction in risk in our portfolios with positive active allocations to cash and bonds
To read our weekly report including style factor breakdowns please click here
Eric J. Weigel
Global Focus Capital LLC
eweigel@gf-cap.com
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