Thursday, November 2, 2017

Investors show rational selectivity in an overvalued world


A review of style performance shows that risk-taking is still occurring across all equity sectors; nevertheless, small cap, dividend, and value returns have fallen behind global and emerging market equity returns for year to date returns.  Global and emerging market indices still show the best returns for the year. Our trend indicators show little change in longer-term up trends.


The bond sectors have behaved as expected for a defensive asset class. Money has flowed out of bond ETF's and show general down trends except for credit sensitive indices. The best performers for 2017 have been in international and emerging market bonds given the general appreciation in currencies. Trends are generally down except for corporates and high yield.


Equity sector performance was lead by the technology sector while energy is still a laggard even with the increase in oil prices. Consumer stables and real estate show down trends as money seems to be chasing the higher beta performing sectors. There is less interest in the more defensive sectors.
Sovereign ETF's continue to show good performance with the exception for this month being with Mexico. Both European and Asian exposure continues to do well; however, there are pockets of sovereign risk with those countries that have fiscal and trade imbalances. 

While market talk has been focused on bubble discussions, there is enough differentiation between styles, sectors, and classes to suggest that investors are making relative performance judgments. This may not change the story of a market that is overvalued, but investors still show regional selectivity.



No comments:

Post a Comment