One of my favorite things to talk about is Behavioral Finance and Investor Psychology. The whole thing is incredibly fascinating to me. That's why I was super stoked when Dr. Daniel Crosby invited me on his Standard Deviations Podcast.
Usually I'm the one asking him the questions, but this time he flipped the script. This was a lot of fun!
At the beginning of each week, we publish performance tables for a variety of different asset classes and categories along with commentary on each.
Looking at the past helps put the future into context. In this post, we review the absolute and relative trends at play and preview some of the things we’re watching to profit in the weeks and months ahead.
We continue to reiterate the same themes and pillars that support our bullish macro thesis. This would include an abundance of evidence pointing to risk appetite, rising developed market yields, strength from commodities, and of course the ongoing rotation toward cyclicals, value, and international stocks, among others...
Just about anywhere we look, we're seeing investors gravitate further and further out on the risk spectrum.
From the desk of Steve Strazza @sstrazza and Louis Sykes @haumicharts
The same strong rotational currents that have been in place in the US since last summer have finally begun to spill over to International stocks... but, not all of them.
For the first time in about a decade, evidence suggests that stock markets around the world have finally built a strong foundation relative to their US counterparts, and might just be ready for a sustained period of outperformance.
How big the move will be and how long it will last are always some of the most difficult variables to predict. We can merely position ourselves accordingly based on the information we do have, and then be keenly aware of new data points as they come in, and constantly re-evaluate and adjust our outlook as appropriate.
At the beginning of each week, we publish performance tables for a variety of different asset classes and categories along with commentary on each.
Looking at the past helps put the future into context. In this post, we review the absolute and relative trends at play and preview some of the things we’re watching to profit in the weeks and months ahead.
The market continues to fire on all cylinders right now. Last week's gains were nothing but a continuation of the same resiliency and momentum we've come to expect from risk assets over the last year.
From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
One lesson you learn pretty quickly as a market analyst is that not all assets are created equal.
Each and every financial instrument carries its own unique bundle of nuances... from a stocks' beta or systematic volatility as well as its residual risk, to the fee structure and rebalancing methodology of an exchange-traded fund or note, to the settlement and delivery procedures governing futures contracts.
All of these things impact the behavior and performance of these various markets.
Today, we're going to focus specifically on the inner workings of International Country ETFs and the way they are impacted by the currency component inherent in these vehicles.
From the desk of Steve Strazza @sstrazza and Louis Sykes @haumicharts
Markets never operate in a static manner. Instead, markets are dynamic and remain in a natural and constant state of flux.
In knowing this, we must always remain flexible and aware of the changing conditions and developments taking place around us. We pride ourselves on our ability to evolve and adapt to these changes in market structure and are never dogmatic in our approach.
For the last decade, US large-cap growth has been where the alpha is, and derivatives of this theme like large over small, stocks over commodities, and US over international have been very powerful relative trends. We know this well because we've been leaning on them for a long time...
Last week's mystery chart was a popular one, so we inverted it to make things a bit more challenging. Someone still guessed it... Nice work.
It was the iShares 7-10 Year Treasury Bond ETF $IEF. The issue with inverting Bond charts is that when you do they look identical to yields. In the case of IEF, we're basically dealing with the US 10-Year Yield $TNX.
Rising rates has been one of the main themes early this year as developed market yields have accelerated higher and hit the pockets of bond investors all over the world.
In this post, we'll check in on some of the most important and most telling credit instruments on both absolute and relative terms in order to piece together the message the bond market is sending investors.
At the beginning of each week, we publish performance tables for a variety of different asset classes and categories along with commentary on each.
Looking at the past helps put the future into context. In this post, we review the absolute and relative trends at play and preview some of the things we’re watching to profit in the weeks and months ahead.
Rotation into value is dominating the narrative right now as money continues to pour out of the former leaders and into long-term secular laggards like Financials and Energy.
In line with this trend, we continue to focus less on US Large-Caps and Growth, and instead look for opportunities in SMIDs, Cyclicals, and International stocks.
The Canadian economy is dominated by Financials and has a diverse and abundant exposure to natural resources. Despite the close proximity, the composition of the country's stock market couldn't be more different from that of the US.
They have a much higher relative exposure to areas like Financials, Energy, and Materials... Basically, all the things that are working.
On the other hand, they have significantly lower exposure to areas like Technology, Health Care, and Discretionary... Basically, all the areas that are NOT currently working.
From the desk of Steve Strazza @sstrazza and Louis Sykes @haumicharts
Over the last few months, there's been a distinct rotation into Financials and other cyclical areas across equity markets not just in the US, but across the globe.
This topic is nothing new around here as it's been a big theme for us recently. Consider some of our calls from this month:
Intermarket analysis is always an area of focus over here at All Star Charts. Right now, there are a lot of changes taking hold beneath the surface in some key cross-asset relationships.
For the longest time, the alpha has been in the US... it's been in large-caps... and it's been in growth stocks. That's been the playbook. We know because we've been running it back for years now.
Although, we're seeing strong evidence that this is no longer the case...
One of the best things about our approach is that it allows us to be incredibly flexible and adjust our views as new data becomes available.
We pride ourselves on never being dogmatic. Speaking of which, despite how much we've leaned on secular leadership from growth and tech stocks in recent years, the data is suggesting we reposition ourselves in favor of Value (read more about it, here).
