Seeking Alpha

The Global Slowdown May Be Over

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Includes: DDM, DIA, DOG, DXD, EEH, EPS, EQL, FEX, HUSV, IVV, IWL, IWM, JHML, JKD, OTPIX, PSQ, QID, QLD, QQEW, QQQ, QQQE, QQXT, RSP, RWM, RYARX, RYRSX, SCAP, SCHX, SDOW, SDS, SH, SMLL, SPDN, SPLX, SPUU, SPXE, SPXL, SPXN, SPXS, SPXT, SPXU, SPXV, SPY, SQQQ, SRTY, SSO, SYE, TNA, TQQQ, TWM, TZA, UDOW, UDPIX, UPRO, URTY, UWM, VFINX, VOO, VTWO, VV
by: Financial Sense
Financial Sense
Registered investment advisor, dividend investing, commodities, ETF investing
Summary

Export sensitive countries such as Germany, Taiwan and South Korea are showing improvement in equity breadth. Given this, we expect small cap and emerging markets to outperform during what seems to be a period of economic reacceleration.

Credit spreads in the US and emerging markets are moving in line with the stock market, showing little signs of stress in the financial market.

Pro-cyclical sectors such as industrials and financials have performed well, showing increasing breadth and participation when looking at the underlying companies. Consumer staples and consumer discretionary have experienced a cool off and are now laggards among sectors.

Though the fundamental picture has improved with global leading indicators and breadth measures, investor sentiment is currently stretched, which may result in a short-term pullback or consolidation.

By FS Staff

Export sensitive countries such as Germany, Taiwan and South Korea are showing improvement in equity breadth. Given this, we expect small cap and emerging markets to outperform during what seems to be a period of economic reacceleration (see Global Leading Indicators Turning Up, Favor Risk-On Tilt).


Source: Bloomberg, Financial Sense Wealth Management. Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.


Source: Bloomberg, Financial Sense Wealth Management. Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.

Credit spreads in the US and emerging markets are moving in line with the stock market, showing little signs of stress in the financial market.


Source: Bloomberg, Financial Sense Wealth Management. Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.


Source: Bloomberg, Financial Sense Wealth Management. Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.

Pro-cyclical sectors such as industrials and financials have performed well, showing increasing breadth and participation when looking at the underlying companies. Consumer staples and consumer discretionary have experienced a cool off and are now laggards among sectors.


Source: Bloomberg, Financial Sense Wealth Management. Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.


Source: Bloomberg, Financial Sense Wealth Management. Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.


Source: Bloomberg, Financial Sense Wealth Management. Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.


Source: Bloomberg, Financial Sense Wealth Management. Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.

Though the fundamental picture has improved with global leading indicators and breadth measures, investor sentiment is currently stretched, which may result in a short-term pullback or consolidation.


Source: CNN Money

Investment conclusions

Our model regime has moved from neutral to slightly overweight equities with an increased exposure to international and cyclical investments given current macroeconomic developments. Further, we have decided to reduce our duration in all of the portfolios except for growth as we believe we are closer to the end than the beginning of this rate cutting cycle. Lastly, we have increased our risk appetite for credit and have obtained exposure in emerging market bonds.

Original Post

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.