Edition 0001. 01.30.2022.
This weekly commentary will assess the macro environment using a top-down approach. Be cautioned. This is a starting point for you own research. Opportunities hide below. While the broadest view helps point us to opportunities and cautions us of risks, we must zoom in and confirm what we see from a higher level. Looking from above by itself will lead to missed opportunities and disappointing losses. The top is a starting point. When we zoom in, it is then the opportunities become clear. To increase the utility of this research, I use ETFs where possible.
We start with performance tables that allow us to track how the symbols have performed over several rolling periods of time. We can see New high/low details, as well as 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 down ma.
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 accelerating. 4 means the momentum condition is negative.
1 = the oscillator line 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 = 21 day closing high or low.
2 = 63 day closing high or low.
3 = 252 day closing high or low.
4 = all-time closing high or low.
Performance Tables & Performance Charts.
Asset Class Performance Table.
This table is a view from the highest level. It is sorted by the year-to-date performance. It looks at the broad US equity market, the world's equity market ex-US, the US Dollar, commodities, US Treasury Bonds, US corporate bonds, US real estate, and global real estate ex-US.
The only positive performers YTD are a broad basket of commodities, GSG, and the US Dollar. We can also see this pair is quantitatively in an uptrend with a positive momentum condition. The GSG made new 252-day closing high. It has been a matter of debate how commodities are so strong in the face of such a strong dollar, defying traditional inter-market analysis. Of our symbol list, it is US real estate and equites underperforming everything else.
Asset Class Year-to-Date Chart.
***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 year-to-date performance, takes a broad view of strength and weakness across the value, growth, and core factors of almost the entirety of the US equity cap-scale.
We see red across the YTD performance. From this level the relative strength, those are the ETFs with the smallest losses, appears in large-cap value areas followed by small and mid-cap value areas. The weakest factors are small and mid-cap growth.
US Equity Performance Year-to-Date Chart.
***For a detailed commentary on 11 S&P 500 sectors, see the weekly edition of The Sector Inspector here.
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 across almost the entirety of the US equity cap-scale.
Finally, upon drilling down we can see YTD green! Amongst the large caps we see energy taking the gold medal by gaining almost 20% YTD. Also with a positive change, we see the food, beverage, & tobacco index. These names can be found in with consumer staples. Amongst the mid-caps we see green in energy and banks. In the small-cap space we see green from energy with just over 10% in gains year-to-date.
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 year-to-date 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. This table is just a small sampling of investible commodities.
Right away we can see green! 6 of these 28 symbols are up double digits year-to-date, and there are more if you look deeper into the commodities space. While some investors are getting beaten up in equites, some are riding high in commodities. Of our universe here, the gold medal is awarded to natural gas with a 30% YTD gain, followed by WTI crude oil with a 15% YTD gain for the silver, gasoline takes the bronze with a 14% YTD gain. Looking at the chart below, we can see that natural gas has just taken the lead from oil in YTD performance.
Commodities Performance Year-to-Date Chart
Bonds Performance Table.
The famous CMT and founder of All-Star Charts, J.C. Parets, is famous 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 activity. 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 bonds go down when economic prospects are going up. The reverse is also true, generally speaking, bonds go up when inflation goes down and/or bonds go up when economic prospects go down. Here is the bonds table sorted by year-to-date performance. The table sorted by year-to-date performance and grouped by international bonds, corporate bonds, municipal bonds, US government bonds, and then we have 3 broad bond ETFs.
Right away we see all red. 0 of the 24 symbols in our universe are up year-to-date. US government bonds are all down, but more so on the longer end of the yield curve. International bond markets are down more than the US bond markets. We should note, when looking at last week’s performance, we see TIPS – treasury inflation protected bonds finishing in the green. This lines up with rising yields due to inflation expectations.
Bond Performance Year-to-Date Chart.
Here is the shape of the yield curve - courtesy of www.StockCharts.com - as of the close on Fridays 01/28/2022:
International Equities Performance Table.
This is another very high-level performance table sorted by year-to-date 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).
EEM = emerging markets.
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:
All red here. The parts of the world that are the least down are frontier and emerging markets. The US equity markets are leading the world lower. If we look at the chart below, we can see frontier markets overtaking emerging markets during the last week of trading.
International Equities Year-to-Date Performance Chart.
International Equities Performance Table - DETAIL.
Here is a table with many international ETFs, again sorted by year-to-date performance. I warned you that looking from only a high level will lead to missed opportunities. If you’ve stuck it out and read this far, you would be thinking the only things up this year are commodities. That is true from a high level, but not true when you zoom in. When we drill down and look at specific countries, we can find strength.
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