Sunday, July 10, 2016

So Much So Fast

“There are decades where nothing happens, and there are weeks where decades happen.”  – Vladimir Lenin

In the US, financial news continued to chatter on what’s next for Brexit, new rate lows on the 10-Year Treasury and the entire yield curve for Switzerland moving into negative territory.  Indeed since the surprise referendum results last month, there is no end of bad news out there ranging from globalization, immigration, robotic automation replacing more of the labor force, etc. These have become the de facto topics of conversation of investors worldwide.  If Lenin were alive, he would likely observe that the occurrences of these past four weeks have felt like the culmination of decades.

US Equity Markets continued their upward move, looking past the sharp Brexit correction and embracing a more positive tone set by the payroll report, with most major indexes gaining over 1% and small caps leading the charge.  Despite its largely ignored Annual Report issued by the Bank of International Settlements at the end of June which paints a rather dismal picture of the state of affairs, markets were generally calm worldwide. The US Yield curve continued to flatten as yield-starved investors rushed to purchase Treasuries and Corporates. The 10 Year Treasury hit 1.38% - a low not seen for decades!  Precious metals lead by Silver and Gold continued to climb and hopes of a China recovery lifted other commodity prices. Foreign markets largely drifted down for the week as measured in both local and USD returns.

We found some very interesting upward moves in our Quant Model scoring last week - SGDJ, SGDM, XME, REMX and SLX dominate the top positions in Basic Materials our Equity Select List. Biotechs rate high on our Reward Ratings. MLP and Emerging Markets jumped significantly in our Quant Mover Scoring System with YMLP, IMLP moving up. Strategic Beta Strategy funds like BTAL, QVM, and FEM moved up 18% or more last week.  Dividend funds like SDIV and EDIV are up in value as well. Some select tech funds like HACK and IGV are also becoming more attractive according to our model. Interestingly, a number of emerging market ETFs, which had been beaten up, are showing up on the list including Russia (RSXJ) and Latin America (EEML) – probably on anticipation of a recovery in commodities. High Quality Fixed Income Funds continue to attract investor assets despite potential interest rate risk.  For some interesting musings, be sure to check out the weekly Quant Mover Section for Gainers and Losers.

Although things seemed to have settled a bit in our ratings this week, one would be ill-advised to take the summer off as volatility is likely to return due to an unexpected turn in any news headline. Indeed Lenin’s observation may prove to be prophetic this summer.

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