Edition 0004. 02.19.2022.
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. 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 accelerating. 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.
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 groups of domestic and foreign equites, domestic and foreign real-estate, commodities, domestic bonds, and the US dollar.
Last week we saw the largest gain from global real estate-ex us as it made a 4-week closing high, though 36 weeks removed from its last 52-week closing high, it peaked in June 2021 and has been in a downtrend since then. Next we had one of our baskets of commodities in the form of the DBC which continues making new 52-week closing highs. The aggregate bond fund saw net selling making a 52-week closing low, as did US equities which made new 13-week closing lows. The US Dollar closed the week lower and finished the week at $96.04.
Asset Class Year-to-Date Chart.
Our YTD chart shows commodities, broadly speaking, continue to show strength. The US Dollar continues to flirt with the flat line as US equities continue losing ground only above US real estate.
***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 across the US equity cap-scale.
While none of our growth or value factors are positive year-to-date, we did see some buying last week in both small and mid-cap value as they made 4-week closing highs. Large cap value, on the other hand, made 4-week closing lows. Growth continues to lag across the cap scale.
US Equity Factor Performance Year-to-Date Chart.
***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 year-to-date performance, takes a look at the strength and weakness across the S&P 500 factor landscape.
While neither closed with a gain last week, we see pure value and the dividend ETF continue to lead year-to-date small gains. Momentum and pure growth continue to lag.
S&P 500 Factor Performance Year-to-Date Chart.
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 we can find industry groups showing strength from the energy sector, staples sector, and financial sectors across the cap scale. Of note, we see all-time closing highs coming from the mid-cap food & staples retailing index.
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.
Last week livestock led the way higher as well as metals, both base and precious. Energy took a breather as the gains in natural gas could not offset the losses in gasoline and oil. Year-to-date, energy and livestock are the leaders.
Commodities Performance Year-to-Date Chart
Commodities Performance Table - Detailed.
Last week we aw livestock leading with massive gains in lean hogs. Metals did very well as gold miners, platinum, and nickel gained. Natural gas gained almost 10.5% in value. Soybeans and lumber also had nice gains. Almost half of the East Coast Chart’s universe of commodities are making new closing highs in the form of 4, 13, or 52 weeks. Shipping, water, and lithium are the worst performers.
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 going down. This 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.
Bonds on the average had a small gain last week, while year-to-date they continue to sell off. 1/3 of our universe made new 13 or 52-week closing lows.
Bond Performance Year-to-Date Chart.
Here is the shape of the yield curve - courtesy of www.StockCharts.com.
Friday 02/11/2022 Close:
Friday 02/18/2022 Close:
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.
EMXC = emerging markets. (excluding China).
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:
Last week we saw gains from frontier markets and emerging markets ex-China as they made 4-week closing highs. The US lead the universe in losses as they made 13-week closing lows. Year-to-date, we see gains from emerging markets ex-China.
International Equities Year-to-Date Performance Chart.
International Equities Performance Table - Detailed.
Here is a table with many international ETFs, again sorted by year-to-date performance. I warned you that only looking at assets from 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.
While it was not a banner week for equites anywhere across the globe, we continue to see some strength in emerging markets. Year-to-Date we continue to see leadership in emerging markets, especially from Brazil, Peru, and South Africa.
Conclusion
Last week saw continued strength in the general commodities space and in the emerging market equites space. The bond markets had a minor bounce. The US, we saw a bounce in small and mid-cap value as the S&P 500 pure value and dividend stocks continue to show positive gains in 2022.
댓글