Market Commentary: Global equity markets have been in a decline since October 2007. Most segments were quickly approaching bear market status by late January, when a rally attempt commenced. The rally lasted about two weeks and ran into trouble when major benchmarks approached the former support levels created by the lows of August and November 2007. As often happens, the former downside support levels have now become overhead resistance. Last week’s market decline took the wind out of the sails of that rally attempt by erasing a large part of those gains. Investors looking for the silver lining can take comfort in the fact that the January lows have not been breached yet. However, until the markets can overcome the resistance that stopped the rally last week, they will likely be mired in predominately-negative trends.
Ten-year Treasury yields have been trading between 3.53% and 3.81% since January 24, 2008. Further declines in yields are not expected because the value of locking in current rates for the next 10 years is not very appealing, especially if inflation fears become reality. Investors requiring a fixed income component in their portfolios should consider inflation-protected securities as a means of mitigating the long-term effect of inflation.
Sectors: The beaten-down groups, primarily the Financial and Consumer Discretionary sectors, led the late January rally attempt. The Financials did another about-face this past week, once again leading the downside action. Telecommunications, Technology, and Financials are the three weakest sectors. The January declines also took out many of the defensive sectors, such as Health Care and Utilities, which now find themselves in the middle of our rankings. The Materials sector remains relatively strong amid healthy global demand and industry consolidation.
Styles: Our current style rankings look very similar to last week and are a complete flip-flop from just a few weeks ago. Style differentiation is always less pronounced than for sectors. It can take many weeks before a sustainable shift in leadership can take hold. As such, it would be premature to make major portfolio shifts at this time.
International: Latin America, led by the strength of Brazil, is currently the only global region not exhibiting a negative intermediate trend. Canada, thanks to its vast exposure to natural resources, is hanging on to the #2 spot in our rankings. China is currently the weakest global market, but it appears to be stabilizing. As you probably recall, China was a top-performing market last year, reaching a frothy stage. Corrections after such run-ups are to be expected and even with its large pullback of the past few months, the long-term bullish trend for China is still intact.
Ten-year Treasury yields have been trading between 3.53% and 3.81% since January 24, 2008. Further declines in yields are not expected because the value of locking in current rates for the next 10 years is not very appealing, especially if inflation fears become reality. Investors requiring a fixed income component in their portfolios should consider inflation-protected securities as a means of mitigating the long-term effect of inflation.
Sectors: The beaten-down groups, primarily the Financial and Consumer Discretionary sectors, led the late January rally attempt. The Financials did another about-face this past week, once again leading the downside action. Telecommunications, Technology, and Financials are the three weakest sectors. The January declines also took out many of the defensive sectors, such as Health Care and Utilities, which now find themselves in the middle of our rankings. The Materials sector remains relatively strong amid healthy global demand and industry consolidation.
Styles: Our current style rankings look very similar to last week and are a complete flip-flop from just a few weeks ago. Style differentiation is always less pronounced than for sectors. It can take many weeks before a sustainable shift in leadership can take hold. As such, it would be premature to make major portfolio shifts at this time.
International: Latin America, led by the strength of Brazil, is currently the only global region not exhibiting a negative intermediate trend. Canada, thanks to its vast exposure to natural resources, is hanging on to the #2 spot in our rankings. China is currently the weakest global market, but it appears to be stabilizing. As you probably recall, China was a top-performing market last year, reaching a frothy stage. Corrections after such run-ups are to be expected and even with its large pullback of the past few months, the long-term bullish trend for China is still intact.
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