Market Outlook | June 10, 2019...MARKET SENTIMENT. 3 EconomicActivity ... ISM PMI dropped to 52.10,...
Transcript of Market Outlook | June 10, 2019...MARKET SENTIMENT. 3 EconomicActivity ... ISM PMI dropped to 52.10,...
Market Outlook | June 10, 2019
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Expansionary or Restrictive?
FEDERAL RESERVE ACTIVITY Is the economy growing or
shrinking?
ECONOMIC ACTIVITY
How expensive are assets? Where do
they stand relative to historical
prices?
VALUATIONSAre asset classes in positive or negative
trends? How are asset classes trending
relative to each other?
MARKET SENTIMENT
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Economic Activity● The ECRI Weekly Leading index dropped 1.1 this week and is down -1.26% year over year.● ISM Manufacturing dropped to 52.1 from 52.8 previously.● ISM Non-manufacturing picked up to 56.9 from 55.5.● Non-farm payrolls grew by only 75k from 224k in the previous month.
Equity Markets● Broad markets had a good week. The Dow was the leader, gaining 4.85% (DIA).● The VIX closed the week down -12.83% at 16.30.● We mentioned a sellable bounce could materialize. We are in that bounce. Markets are no longer oversold.
Factors● High Beta and momentum were the top performing factors last week, up 5.13% and 5.11% respectively. Dividend growth was also up
4.98%, showing strong relative strength.Sectors● Materials gained over 9% last week. Semiconductors had a good week as well, finishing up 5.98%.
Intermarket● Lumber gained 0.68% against Gold last week.● Copper declined -3.06% against Gold last week.● High Yield bonds (JNK) gained 1.72% against Treasuries (TLT).● Stocks gained against bonds and gold last week (VT:IEF = 3.23%) (VT:GLD = 1.07%).
Fixed Income, Commodities, Currencies● The 10 year yield was down 5 basis points to 2.09%● Precious metals were up 2.73% for the week.● Industrial metals were down -1.32%.● Emerging market bonds rallied 1.88% (EMB).● The Euro gained 1.50% against the dollar and 1.21% against the Yen.
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Chart of the Week: ISM PMI dropped to 52.10, continuing the down trend that began in mid 2018. Growth has continued to slow in the US since peaking in the third quarter of 2018.
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Chart 2: US ISM Non-Manufacturing picked up to 56.90 this month. The trend is still down, indicative of the larger growth slowing trend in the US economy.
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.
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Chart 3: Non-farm payrolls grew by only 75k last month. Year over year growth slipped to 1.6%.
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.
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Chart 4: The ECRI Weekly Leading Index fell last week. The year over year growth rate of the four week average of the WLI is now -2.06%.
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.
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Chart 5: The Dow Jones Industrial was the top performing stock market last week, gaining 4.85% on the week. The weakest market was emerging markets, gaining 1.15%.
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.
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Chart 6: Materials were the top performing sector on the week, gaining 9.06% on the week. Communication services was the worst performing sector, up 1.02%.
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.
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Chart 7: High Beta was the strongest factor for the week, gaining 5.13%. Momentum followed, gaining 5.11% for the week. The weakest factor was the small cap factor, which gained 3.46%.
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.
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Chart 8: Emerging market bonds and high yield were the top performing bond market segments, gaining 1.88% and 1.86% respectively. The weakest performing segment was long-term Treasuries, which gained 0.14% for the week.
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.
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Chart 9: The CRB index finished the week down-0.54%. Industrial metals and agricultural commodities were the laggards, while precious metals were the leaders. Lumber also gained over 3% on the week.
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.
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Chart 10: The Euro was stronger against the dollar last week by 1.46% and stronger against the Yen by 1.29%. The dollar weakened over -1.20% on expectations of several rate cuts to occur over the next 12 months. Bitcoin dropped -4.79% on the week.
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.
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Chart 11: The Dow Jones Industrial Average (DIA) rallied almost 5% last week. It remains in a positive trend. Transports remain weak though and are not confirming.
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.
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Chart 12: High Beta (SPHB) bounced 1.15% against low volatility (SPLV) last week. Support is holding for now. Continued leadership from SPHB could result in further upside for the broad markets.
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.
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Chart 13: Momentum (MTUM) gained another 5.11% last week and is near all time highs. After lagging for the better part of 2019, the momentum factor is close to breaking out.
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.
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Chart 14: Materials rallied 9% last week (XLB). This was a monster move, right as this particular sector was approaching a reversal in trend. It remains in a positive trend.
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.
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Chart 15: During an otherwise bullish week, small caps continued to drop against large caps, shedding almost -1%. Something doesn’t look right.
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.
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Chart 16: Copper dropped over -3% against Gold last week and is at the bottom of the support range. A continued drop would signal upside momentum in volatility.
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.
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Chart 17: High Yield spreads compressed on the week, but still remain above the lows set last year. A breakdown would signal further upside in risk assets, a breakout to the upside would signal a risk off move.
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.
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Chart 18: Lumber finally stopped the bleeding, bouncing over 3% last week.
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.
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Chart 19: Gold is close to breaking out above tough resistance at the $1350/oz level. Gold gained close to 3% last week as the dollar weakened.
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.
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Chart 20: Short-term breadth improved significantly last week. However, measures of long-term internal strength failed to reverse. Improving market internals are needed to confirm that the recent market action has staying power.
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.
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Confirming Evidence of a continued rally:
● US stocks are in a positive trend relative to Gold (intermediate).
● Stocks staged an impressive rally and broad markets are back above
key moving averages.
● Short-term market internals improved last week.
● High Beta led all factors last week.
● High Yield spreads compressed.
Non-Confirming evidence of a continued rally:
● The ECRI weekly leading index is down year over year.
● Copper continued to break down.
● Small caps continued to deteriorate against large caps
● Precious metals led all commodity segments.
● Long-term market internal measures remain weak.
● Stocks (All World w/ US) are back in a negative trend.
Underweights:
Credit, Growth, Cyclicals, Small Caps, Developed markets,
Overweights:
Treasuries, Low Volatility, Utilities, REITS, Technology, Consumer
Staples, Dividend Growth, High Quality, EM
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.
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DISCLOSURE
© 2019 WealthShield LLC. All Rights Reserved. This is provided for informational purposes only and should not be considered a recommendation to buy or sell a particular security. Past performance is no guarantee of future returns. Please see attached disclosures.