Edition 0007. 03.12.2022.
This weekly commentary will assess the macro environment using a top-down approach. This is a starting point. While the broadest view helps point us to opportunities and cautions us of risks, we must zoom in. Looking from above by itself will lead to missed opportunities and disappointing losses. To increase the utility of this research, I use ETFs where possible.
We start with performance tables. These allow us to track how the symbols have performed over several rolling periods of time. We can see New high/low details and determine trend and momentum using quantitative measures. Here are a few notes to help you interpret the tables.
They are grouped first by family, and then sorted by performance.
Quantitatively, the general trend is determined by price in relation to its 40-week simple moving average. 1 means the trend is up. 2 means the trend is vulnerable. 3 means the trend is down.
1 = close is above the ma and the ma is up.
2 = close is below the ma and the ma is up, close is above a flat or ma that is down.
3 = close is below the ma and the ma is down.
Quantitatively, the general momentum condition is determined by a 12,26,09 Price Percentage Oscillator – think MACD. 1 means the momentum condition is positive. 2 means the momentum condition is positive but decelerating. 3 means the momentum condition is negative but decelerating. 4 means the momentum condition is negative.
1 = the oscillator is above 0 and the histogram is above 0.
2 = the oscillator is above 0 but the histogram is below 0
3 = the oscillator is below 0 but the histogram is above 0.
4 = the oscillator is below 0 and the histogram is below 0.
The ranking of closing highs and lows is as follows:
1 = 4-week closing high or low.
2 = 13-week closing high or low.
3 = 52-week closing high or low.
4 = all-time closing high or low.
Asset Class Performance Table.
This table is a view from the highest level. It is sorted by one week performance. It looks at the broad groups of domestic and foreign equites, domestic and foreign real-estate, commodities, domestic bonds, and the US dollar.
New 52-week closing high for the US Dollar. Every other asset class closed lower, even commodities as a whole. Domestic and international real estate, bonds, and stocks record new 13 or 52-week closing lows.
Asset Class Year-to-Date Chart.
YTD, the picture remains the same. Commodities and the USD remain positive as real estate, bonds, and equities remain negative globally.
***For a detailed commentary on the US equity landscape, see the weekly edition of The US Equity Landscape here.***
US Equity Factor Performance Table.
This table, sorted by one week performance, takes a broad view of strength and weakness across the value, growth, and core factors across the US equity cap-scale.
Another tough week for US equities. Deterioration is evident across this performance table. Not one symbol is in a quantitative uptrend and/or has a quantitatively positive momentum condition. This is a change from last week where we saw positive trend characteristics from S&P 500 pure value, mega cap value, and the S&P 500 value ETFs. 19 of 22 symbols, so greater than 85% of the symbols, recorded new 4, 13, or 52-week closing lows. Value still outperformed growth, though both styles were negative on the week, and all but the S&P 500 pure value ETF remain negative this year-to-date.
US Equity Factor Performance Year-to-Date Chart.
Not much of a change. RPV continues to weaken.
***For a detailed commentary on 11 S&P 500 sectors, see the weekly edition of The Sector Inspector here.***
S&P 500 Factor Performance Table.
This table, sorted by one week performance, takes a look at the strength and weakness across the S&P 500 factor landscape.
Every symbol in this performance table lost value last week. Every symbol is making some form of a new weekly closing low. The high dividend ETF has had a shift from positive to neutral momentum.
S&P 500 Factor Performance Year-to-Date Chart.
Both SPYD and RPV remain above 0. SPY climbed from 6th to 4th position.
US Sector Industry Groups (GICS Level II) Performance Table.
This table, sorted by year-to-date performance, shows us the view from under the surface of the well-known 11 S&P sectors and looks at the 24 industry groups across the US equity cap-scale.
Year-to-date, the only industry group in the large and small-cap space with a positive performance is energy. The mid-cap space has energy with a positive performance and as well as a slight gain from banks.
For a refresher on the MSCI GICS Classification Standards, visit this website.
Commodities Performance Table.
While many investors focus on equities, there are indeed three asset classes, not including currencies, which are bonds, stocks, and commodities. This table, sorted by one week performance, takes a very broad perspective on the commodities landscape. Just for context, generally the commodity market is broken into energy, metals (industrial and precious), agriculture (grains and softs), and livestock.
In a sea of green, last week we saw some red. Livestock and precious metals led as energy and base metals lagged. Precious metals finished at a 52-week high.
Commodities Performance Year-to-Date Chart
Last week gave back some of the gains from the general commodities acceleration 2 weeks ago. The positions remain largely unchanged.
Commodities Performance Table - Detailed.
This table, sorted by one week performance, zooms in.
While the broad commodity ETFs were dragged down by energy last week, there was plenty of strength and continued new highs.
Energy – Big gains in WTI, but a decline in everything else.
Metals – Precious metals saw leadership from silver and gold, while base metals didn’t fare so well – except for Nickel which was incredibly wild and trading was halted several times.
Agriculture – Softs were led by gains in cotton and losses were led by orange juice. Grains were led by canola and soy while losses were led by wheat and rice
Livestock – Livestock was up across the board led by lean hogs.
Commodity related ETFs – This group was led higher by shipping and precious metal miners.
Here is the same table sorted by the year-to-date change.
Bonds Performance Table.
The famous CMT and founder of All-Star Charts, J.C. Parets, is known for saying, “I trust two things in this world, dogs and the bond market.” The bond market is where the “smart” money lives. Thus, following the bond market is very helpful in understanding investor sentiment and positioning. Remember a few things about this market. Bonds and yields move inversely to one another. This means, if bonds go down then yields go up and if bonds go up then yields go down. Generally speaking, bonds go down when inflation goes up and/or when economic prospects are going up. The reverse is also true generally speaking, bonds go up when inflation goes down and/or when economic prospects are going down. This table, sorted by one week performance, is grouped by international bonds, corporate bonds, municipal bonds, US government bonds, and then broad bond ETFs.
Bonds continued their broad decline last week. We did see buying is US TIPS and short duration TIPS. We also saw a little buying of emerging markets debt. 22 of 27 symbols in this performance table, so more than 81%, recorded 52-week or all-time weekly closing lows. Conversely, TIPS and short duration TIPS recorded new 4 and 13-week closing highs.
US-Treasury bonds were led lower by the long end of the curve. Munis and corporate debt were led lower by high-yield bonds. International bonds were led lower by treasuries with a small amount of buying emerging markets bonds which is largely sovereign debt.
Bond Performance Year-to-Date Chart.
YTD we see short duration TIPS holding above 0 as international TIPS fell back below 0.
Here is the shape of the yield curve - courtesy of www.StockCharts.com.
Friday 03/04/2022 Close:
Friday 03/11/2022
International Equities Performance Table.
This is another very high-level performance table sorted by one week performance. Please think of the ETFs this way:
ACWI = developed and emerging markets. (including the US).
ACWX = developed and emerging markets. (excluding the US).
URTH = developed markets. (including the US).
EFA = developed markets. (excluding the US).
SCZ = developed markets small-caps. (excluding the US and Canada).
EEM = emerging markets.
EMXC = emerging markets. (excluding China).
EWX = Emerging markets small-caps.
FM = frontier markets.
SPTM = US market (small, mid, & large cap).
SPY = US market (large cap).
For a refresher on the how MSCI organizes the global markets, visit this website:
From the broadest perspective, the only strength was saw last week in international markets was from the EAFE small-cap stocks. It is noteworthy that the EAFA small-caps have the weakest performance this year-to-date. It includes Europe, Australia, Asia, and the Far East. US markets lead the world lower, second to only emerging markets which were weighted down by China.
International Equities Year-to-Date Performance Chart.
The YTD chart shows a global decline since the second week of January.
International Equities Performance Table - Detailed.
Here is a table with many international ETFs, sorted by one week performance.
Zooming in, we can see bounces created pockets of strength in all of the subdivisions of the global equity markets. Lots of strength in Europe. We saw strength in Sweden, Finland, Spain, Portugal, Germany, Hungry, and Poland. These are all countries that are beaten down year-to-date. We did see some strength from countries that are up year-to-date. These are Peru in South America, Indonesia in Asia, and South Africa in Africa. Russia’s RSX fell another 63%.
Here is the same table sorted by year-to-date change.
In the emerging market space, the year-to-date strength lies in Latin America, including Peru, Columbia, Brazil, and Chile. We also see strength from South Africa, Qatar, and Chinese energy. The standalone nation of Saudi Arabia is also performing well this year-to-date.
Conclusion
The US Dollar was up and we saw weakness in all asset classes, even commodities. Value factors continue to weaken, as does industry group participation. From a more granular perspective, livestock and precious metal commodities performed well, as did Latin American countries.
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