Monday, October 22, 2012

The stock market honored the 25th anniversary of Black Monday with declines across all equity sectors.  The weakest ETF Global Sector Indices held up the best where the Utilities dropped -0.88% to bring its year to date losses to -8.09%.  The Materials Index is only up 7.67% ytd and also kept its losses Friday below 1%. The year’s best performing Consumer Discretionary Index was down -1.2% on Friday which was better than the Health Care and Info Tech Indices which each dropped by -2.15%.  The story was similar in the Geographic Indices where the best ytd led the pack down.  Europe’s leading 25.33% ytd gain is 1.45% lighter after Friday’s selling and the US & Canada, G8 and G20 were all down by -1.64% but up almost 20% ytd.  The Latin America Index is down -12.74% ytd after losing -1.32% and the Middle East & Africa Index lost -1.3% Friday to bring it to -1.44% ytd.  We need to look at the Asset Class Indices to find some green where Fixed Income eked out a 0.07% daily gain to tack onto its 19.17% ytd gain.  The hedge fund masters of the universe must have seen the selling coming as the Multi Asset Index was up 2.78% among Friday’s damage, although ytd it is lagging at 10.84%.

Remember that Quant will not keep us out of a falling market, it is designed to keep your equity allocation out of the worst parts of one over the intermediate term.  The relative rankings saw some change after Friday’s selling with familiar names moving back into the upper ranks.  China’s FXI and GXC are back in the top 5; energy funds VDE, XLE and XOP are ranked 1st, 11th and 14th; metals funds such as XME and GDX are 3rd and 11th (tied); and Info Tech sees VGT and QQQ in 4th and 9th place.  Quant looks to again be recommending an aversion to the US dollar with emerging markets ranking better as seen by EPP and EEM at 6th and 8th place.  S&P 500 companies get almost half their sales outside of the US and all three funds that track the index are in the top 20 today, another familiar positioning.  Whether or not to seize Friday’s equity selling as a buying opportunity is your call, Quant is here to help you allocate after making that call.

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