Edition 0006. 03.05.2022.
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. When we zoom in, 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 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.
Last week the commodities space was red-hot, heated by geopolitical unrest. The US Dollar was also up, as was US real estate, and the US and international bond complex. US equities finished lower, though not as low as global equities and real estate. Commodities and the USD push to 52-week closing highs as US equities and global equities and real estate push to 13 and 52-week lows. The USD closed at $98.67.
Asset Class Year-to-Date Chart.
The YTD performance remains largely the same as two weeks ago, the All Countries World Index ex-US has fallen into last place.
***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, takes a broad view of strength and weakness across the value, growth, and core factors across the US equity cap-scale.
Tough week for equities. The only green was in the small-cap pure value space, RZV, though it is not positive YTD as is the S&P 500 pure value ETF, RPV, which closed down for a loss of 1% in value last week. RPV’s quantitative momentum has turned from positive to neutral. Also with a weekly gain was mega-cap value, though like RZV, is not positive YTD. 13 of our 22 ETFs made 4, 13, or 52-week closing lows. RZ V did make a 4-week closing high.
US Equity Factor Performance Year-to-Date Chart.
Not much of a change. RPV has weakened as RZV makes a run at the 0-line.
***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.
The picture here is the same as two-weeks ago. I did note the momentum change for RPV above.
S&P 500 Factor Performance Year-to-Date Chart.
S&P 500 areas of interest remain largely the same. High dividend and pure value remain positive YTD. Last week we saw an interest in low volatility names, though that ETF remains negative YTD.
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.
Energy, some consumer staples names, and some materials names continue their positive YTD performance. Last week the participation was a bit broader than the previous few weeks.
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.
Last week we saw massive gains from, yes, the energy complex. We saw gains across the board except for the livestock. All 10 symbols, except for livestock, closed at 13, 52, or all-time weekly highs.
Commodities Performance Year-to-Date Chart
Commodities remain strong and accelerated to the upside except for the livestock index which is throwing back to test broken resistance now as support.
Commodities Performance Table - Detailed.
This table, sorted by one week performance, zooms in.
First thing I see is 50 of 64 symbols in this table made new 4, 13, 52, or all-time weekly closing highs. 8 symbols made new 4,13, or 52 week closing lows.
Energy - Energy is up across the board.
Metals - Base metals were led by nickel and aluminum. Lithium continues to lag an make a 13-week closing low. Precious metals were led higher by Palladium. Gold jumed more than 4%.
Aggrictulte - Grains blasted higher led by wheat and corn. Softs were mixed with major gains in lumber, sugar, and orange juice. Losses were in cotton and coffee.
Livestock – Livestock closed lower last week across the board. Lean hogs maintain a solid YTD return of more than 23%.
Commodity related ETFs – Strong week for natural gas companies, shipping rate futures (BDRY), and gold, silver, and copper 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 going down. This table, sorted by one week performance and grouped by international bonds, corporate bonds, municipal bonds, US government bonds, and then we have 3 broad bond ETFs.
US Treasury bonds were up across the board, though the strongest performance was from the long end of the curve. Muni and corporate bonds were mixed. International bonds were mixed with developed market bonds up and emerging market bonds down. International TIPS were also up.
Bond Performance Year-to-Date Chart.
Bonds continue their decline. We do see slightly positive performance from short term US TIPS and international TIPS.
Here is the shape of the yield curve - courtesy of www.StockCharts.com.
Friday 02/25/2022 Close:
Friday 03/04/2022 Close:
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).
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:
US markets led the landscape for a second week in a row. The ACWI All-World index was down. The biggest losses were in EFA which includes European and Asian markets that saw massive losses including Russia, Hungary, Greece, Poland, and China to name a few.
International Equities Year-to-Date Performance Chart.
The YTD chart shows a global decline.
International Equities Performance Table - Detailed.
Here is a table with many international ETFs, sorted by one week performance.
Zooming in we some markets were up. In the developed arena we see gains from commodity rich nations including New Zealand, Australia, and Canada.
Emerging markets saw the same theme with Qatar, UAE and Latin American markets gaining. Russia was downgraded from emerging to standalone. It lost almost 64% in value last week.
Here is the same table sorted by year-to-date change.
Conclusion
Commodities continues to be the leading story. In the US we see some demand for pure growth, dividend paying, low volatility stocks, and consumer staples type issues. Bonds gained last week, as did the US dollar. Internationally we saw strength from commodity exporting nations.
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