I think it’s important to put things into perspective as often as we can. Where has the money been flowing so far this year? We know that within the United States Defense has been the key: Healthcare, Staples and Utilities. But what about the rest of the world?
Today’s chart of the day compares the US to other regions around the Globe. I think it’s clear that Japan has led the way higher in equities. But what about everywhere else? Canada is down over 5% year-to-date, Emerging Markets are down 6.5%, Latin America down over 3%, Europe down for the year and Africa/Middle East down over 12%.
From where I’m sitting, regions of the world with more exposure to commodities have been weaker. The money has been flowing to US and Japan. But everything else has been struggling. I’ve been hearing about these mean reversion trades where the underperforming areas of the world will benefit from the rotation into resource heavy economies. If we do indeed see that money flow change, then these countries will certainly benefit. But when equities sell off, they seem to be the first ones that get hit. This has not changed yet.
We’ll be watching for this rotation that I keep hearing about. But for now, the underperformers keep underperforming and I cannot stress enough that this has yet to change.
Tags: $NK_F $DXJ $SPY $EEM $ILF $FEZ $GAF