MacroView : Reading Between the Lines. US 10 Yr US Dollar Index Nikkei US Financials v. Far East Financials US Financials v. US REITs SP 500 v. Brazil SP 500 v. Emerging Markets Brent Crude Gold and Gold Miners.
Reading Between the Lines
Our mission is to produce original, unbiased, thought-provoking observations that will unlock the message of the markets. Our view is neither bullish nor bearish, our goal is to uncover potential ideas and opportunities for our clients.
Recent movements in the markets have been swift, leaving many investors ill-prepared for higher volatility. Global interest rates are rising, foreign currencies are declining against the USD, and global equity markets are dropping. While the S&P is performing well on the surface, the internals of the market are showing erratic movements across sectors.
Will this current volatility usher in a new wave of increasingly turbulent markets?
In terms of the US market, there have been warning signs over the past several weeks indicating current trends will not hold. We are now starting to see the correction on an absolute level.
With the underperformance of the global markets relative to the S&P widening to 2009 extremes, we are now at a crossroads. If the rest of the world does not begin to stabilize, there is a heightened risk of weakening in the S&P.
During a rising market, relative performance is what matters most to portfolio managers. If the market rises by 10%, a fund manager ultimately strives to beat their respective benchmark. During bear markets, the focus shifts toward ABSOLUTE performance. Different strategies become necessary for different markets.
Our goal is to provide an outline that helps
guide you through these shifting markets.
US 10Yr YLD and US Dollar Index (July 2008 – Present)
Every Action Causes a Reaction:
Nikkei Correction and the Relative Outperformance of US Financials
Nikkei Absolute Performance
Nikkei has risen over 75% since November of 2012. While the correction was overdue, it might be the start of something more meaningful.
US Financials Relative to Far East Financials Index
US Financials have outperformed Asian financials by 20% since the Nikkei peak
US Financials Relative to US REITs
SP 500: 8 Month Performance
Since the recent lows in November 2012, the SP500 has had 3 corrections of nearly 3% that brought the index to within 6% of its 200dma. The current correction of about 3% still leaves the index almost 9% from its 200dma.
Bouncing Ball or a Safe?:
SP 500 Relative to Brazil (EWZ)
SP 500 Absolute Performance
SP 500 currently 8.5% above 200dma
USD bottomed April 2011
Brazil (EWZ) Absolute Performance
Brazil (EWZ) Relative to SP 500
Brazil down over 65% RELATIVE to SP 500 since Oct 2010
Trend remains down yet looks to be entering exhaustion zone. Capitulation may be ahead.
Emerging Markets (EEM) Abolute and Relative to SP500 - Brent Crude
EEM Absolute Performance
EEM Relative to SP500
Brent Crude Performance
GOLD (USD) and the GOLD MINERS (GDX)