To the extent that momentum of the recent past carries through to the near future, things don't look so good for stocks, and the bubble in bonds is ominous.
There are many fundamental and macro-economic and technical chart factors that investors are examining in an attempt to divine the future.
One of the inputs is simple recent performance. This post provides a panoramic view of price performance over 1-year, 3-months, 1-month and the last day of last week (June 1) for a wide variety of representative ETFs for key asset categories.
Based on lack of encouraging news over the weekend, the strongly negative futures as of midnight tonight (Sunday), and deep red on the stock screens in Asia, the decline seems set to continue next week.
Recent Price Performance of Key Asset Categories:
Utilities and consumer staples have been the best sectors among US equities. Dividend Aristocrats are ahead of broad market stocks. Low volatility US stocks are doing well, but note that they are heavily biased toward utilities and consumer staples.
Energy, then financials and basic materials are the worst sectors.
Mega-cap and large-cap have outperformed mid-cap and small-cap.
All of the significant country stock indexes are negative, with the US as the least awful when the 1-year, 3-month, 1-month and 1-day data are viewed together versus the other countries.
Russia is at the bottom of the pile for 1 month -- not surprising given their overwhelming reliance on energy exports and the poor performance of energy as a sector.
Spain and Italy are on the bottom of the pile for 1 year, but strongman Germany has done poorly as well.
Indonesia, which has previously been a strong performer, is doing badly as is Brazil.
China, which has been a problem performer for a few years now, and which has a slowing economy and a rising set of negative banking issues, is doing comparatively well.
US Bonds are expensive and US Treasuries are in a bubble, but so far have been the stellar performers that have trimmed the losses in portfolios with a fixed income allocation.
High yield corporate bonds are up in price minimally over 1 year and have been in limited loss mode for the last 3 months. High Yield muni-bonds, on the other hand, are doing well.
Long-term bonds have done the best, and are the most overvalued with the higher risk of major losses if the fear premium goes away and/or interest rates begin to rise.
In all the cases, with the possible exception of high yield, the after-inflation, after-tax return on bonds it negative. People are so frightened that they are willing to sign up for guaranteed real losses, in exchange for principal safety -- which safety is non-existent if they do not intend to hold to maturity, because of the interest rate risk.
Developed market international sovereigns are a mess, for the obvious reasons relating to Europe. The parabolic rise in German bonds has not been able to overcome the declines in price of other countries bonds. Emerging market dollar denominated sovereigns are doing OK over 1 year, but have been giving back return over the past 3 months, and were the worst performers over 1-month and the last day of last week.
Symbols in Table Images:
|US Stock Sectors||Symbol|
|US Market-Cap & Other Slices||Symbol|
|S&P 500 Low Volatility||SPLV|
|S&P 1500 Dividend Aristocrats||SDY|
|S&P 500 Equal Weight Sectors||EQL|
|S&P 100 Mega-Cap||OEF|
|S&P 500 Large-Cap|
|S&P 1500 Composite||ISI|
|S&P 600 Small-Cap||IJR|
|S&P 400 Mid-Cap||MDY|
|S&P 500 Equal Weight||RSP|
|Shanghai Stock Exchange ("China")||.SSEC|
|Bombay Stock Exchange ("India")||.BSE|
|Total US Stocks||VTI|
|Total World Stocks||VT|
|Total World Stocks ex US||VEU|
|Aggregate US Bonds||BND|
|High Yield Muni||HYD|
|Muni National Short||SUB|
|Muni National Long||MUB|
|DM non-US LC Intermediate Sovereigns||BWX|
|DM non-US LC Short-Term Sovereign||BWZ|
|High Yield Bond||HYG|
|Emerging Markets Bond||EMB|
If you are a trader, you are not long in stocks at this time, at least not the broad indexes, and you may be in bonds. If you are a long-term investor, you are sweating bullets over whether this is a bear or a correction, whether we are seeing capitulation or the beginning of a steep and continuing slide, and whether there will be government or central bank action just around the corner that will put things back together for a while.
We tend to lean toward the belief that while governments and central banks are low on ammunition, they are not yet out of bullets -- so we expect only a severe correction, but are preparing for worse with well above target cash allocation, and a bias toward high quality dividend stocks mostly from the US. We do have energy and materials related exposures that are rather painful at the moment, but are not bailing on them.
Disclosure: QVM has positions in XLU, SPY, XLB, MUB, HYD, and HYG as of the creation date of this article (June 3, 2012).
Disclaimer: StopAlert.com is a service of QVM Group LLC, a registered investment advisor. This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice. You are responsible for your own investment decisions. This article is presented subject to our full disclaimer found on the QVM site available here.