Market Commentary: Nearly all global financial markets rallied strongly this past week – bonds as well as stocks and international as well as domestic equities. The one-week (Tuesday to Tuesday) performance numbers look quite impressive as last Tuesday marked a short-term bottom. In that regard, the one-week numbers of a week ago looked rather dismal as the markets were ending that short-term slide. For the S&P 500, the two-week combination produced a nearly unchanged result of +0.2%. International markets were also nearly flat, easing off just -0.1% for the two-week period. Even with all the hoopla regarding the spike on 10-Year Treasury yields, the domestic bond market (Lehman Brothers Aggregate) had a modest two-week change of -0.2%. Nearly all global markets had a volatile two weeks, yet finished the period about where they started. Given this scenario, it is easy for us to identify the short-term leaders and laggards.
Sectors: The top sectors during the past two weeks were Energy at +2.3%, Industrials +1.2%, and Materials +1.0%. The two-week laggards were Consumer Staples -1.8%, Health Care -1.5%, and Utilities -0.9%. These two groupings also happen to coincide with our intermediate-term momentum rankings. This implies that intermediate-term relative strength has translated extremely well into short-term relative strength for sector activity.
Styles: The top styles of the past two weeks were Micro Caps +1.1% and Large Cap Value +0.5%. The laggards were Mid Cap Value -1.6% and Mid Cap Blend -1.4%. On the surface, these results appear to conflict with our momentum rankings. However, with those intermediate-term rankings currently in a narrow range, there is not much of a conclusion we can draw regarding the correlation between the short-term and intermediate-term results at this time.
International: The two-week results for global markets are highly correlated with our intermediate-term rankings. China, Latin America, and Diversified Emerging Markets were the top performers, all gaining in excess of +2.3%. Meanwhile, Japan was the laggard with a -0.7% return, and the UK joined the USA and EAFE (international markets) with two-week results that were near zero. Global equity strength clearly lies with the smaller capitalization markets.
Sectors: The top sectors during the past two weeks were Energy at +2.3%, Industrials +1.2%, and Materials +1.0%. The two-week laggards were Consumer Staples -1.8%, Health Care -1.5%, and Utilities -0.9%. These two groupings also happen to coincide with our intermediate-term momentum rankings. This implies that intermediate-term relative strength has translated extremely well into short-term relative strength for sector activity.
Styles: The top styles of the past two weeks were Micro Caps +1.1% and Large Cap Value +0.5%. The laggards were Mid Cap Value -1.6% and Mid Cap Blend -1.4%. On the surface, these results appear to conflict with our momentum rankings. However, with those intermediate-term rankings currently in a narrow range, there is not much of a conclusion we can draw regarding the correlation between the short-term and intermediate-term results at this time.
International: The two-week results for global markets are highly correlated with our intermediate-term rankings. China, Latin America, and Diversified Emerging Markets were the top performers, all gaining in excess of +2.3%. Meanwhile, Japan was the laggard with a -0.7% return, and the UK joined the USA and EAFE (international markets) with two-week results that were near zero. Global equity strength clearly lies with the smaller capitalization markets.
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