In this month’s video, I look at the overall trends in global stock markets with particular emphasis on the U.S. dollar impact. Chart review includes analysis of U.S. stocks, international stocks, interest rates, oil prices, and volatility. Observations of risk and reward are noted throughout, with an emphasis on trend following and sensible portfolio management strategies. Recorded on July 26, 2017.
The concept of investing in European stocks seems difficult to stomach considering the decade of lost returns versus their U.S. counterparts. A new post by Michael Batnick, Director of Research for Ritholtz Wealth Management, details the difficult 10-year journey for this foreign investment class. The U.S. has simply been the star outperformer on the global stage for so many consistent years that the home-bias phenomenon has been taken to a new level.
According to their research, U.S. stocks now make up 80% of the average U.S. investor’s equity portfolio. The remaining 20% is likely split among a variety of European, Asian, and emerging market exposure. This overweight exposure towards a high-flying asset class ultimately leaves many investors susceptible to being caught off guard as the pendulum swings in the opposite direction.
Emerging market bonds were one of the few bright spots across the fixed-income landscape in 2016. This category trailed only U.S. high yield debt by total return metrics despite some meaningful volatility in the aftermath of the U.S. election. Investors also took notice of this outperformance and the favorable yields to boot. Read more
The impact of currency fluctuations is a dynamic that more and more investors have taken an interest in over the last several years. A decade ago, it was difficult to trade the currency markets without a dedicated forex account and sophisticated knowledge of the landscape. This was the realm of institutional investors and macro hedge funds. Fast forward to 2017 and there is a myriad of mainstream options to take advantage of these markets in a normal brokerage account.
At present, there are 32 exchange-traded products dedicated to currency trading pairs or indexes. There are also countless other ETFs and mutual funds with embedded currency strategies coupled with stock or bond holdings. These “local currency” or “currency hedged” indexes allow ETF investors the ability to mitigate certain risks of owning foreign investments or take advantage of a specific currency trend.
The churning in the stock market has created little net gain in the major domestic indices over the last four months. In this video, I look at areas of the market that are showing strong momentum, alongside those that should be viewed with caution. Charts include: large cap stocks, technology stocks, U.S. dollar index, emerging markets, interest rates, and municipal bonds. Recorded on October 25, 2016.